Reluctant Regulation

Bortolotti, Bernardo and Cambini, Carlo and Rondi, Laura (2012): Reluctant Regulation.

Abstract

We study the effect of state ownership on the market-to-book ratios of publicly traded European utilities observed from 1994 to 2005. We find that when the company is subject to independent regulation, state ownership is positively associated with firm value. This effect is strong and significant in countries where weak checks and balances and political fragmentation do not constrain the power of the executive. We conclude that where political institutions are weak, politicians imperfectly delegate powers to regulatory agencies in order to benefit state-owned firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Privatization; Regulatory Independence; Political Institutions; Firm Value
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L33 - Comparison of Public and Private Enterprises and Nonprofit Institutions ; Privatization ; Contracting Out; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L90 - General

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