How does choice of regulatory regime affect the level of shareholder risk in regulated companies? A new study shows that investors bear the greatest nondiversifiable risk with price caps and the least with rate-of-return regulation.Evidence about how choice of regulatory regime affects the level...

Evidence about how choice of regulatory regimes affects the level of shareholder risk for the regulated company has traditionally focused on studies in the United Kingdom and the United States. Broad comparisons of price-cap based regimes (as practiced in the UK) with rate-of-return regulation...