The Capital Structure of Regulated Firms

The equilibrium price, investment, and capital structure of a regulated firm are examined using a sequential model of regulation. The firm's capital structure is shown to have a significant effect on regulated prices, so that the firm's choice of debt and equity levels refelect regulatory responses. Moreover, debt financing weakens the incentive for regulators to "hold up" the firm so that leveraged firms can invest more than all-equity firms.

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Year of publication:	1991
Authors:	Spiegel, Yossef ; Spulber, Daniel F.
Publisher:	Evanston, IL : Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
Subject:	capital structure \| regulation \| investment \| public utilities \| bankruptcy

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Series:	Discussion Paper ; 942
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	hdl:10419/221301 [Handle] RePEc:nwu:cmsems:942 [RePEc]
Classification:	L51 - Economics of Regulation ; G32 - Financing Policy; Capital and Ownership Structure ; G38 - Government Policy and Regulation ; L9 - Industry Studies: Transportation and Utilities
Source:	EconStor

Persistent link: https://www.econbiz.de/10012235757