DP8508 | Investment and capital structure of partially private regulated firms

Publication Date


JEL Code(s)


Programme Area(s)



We develop a model that examines the capital structure and investment decisions of regulated firms in a setting that incorporates two key institutional features of the public utilities sector in many countries: firms are partially owned by the state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt, and are allowed to charge higher prices when they are more privatized and when the regulator is more independent and more pro-firm.