The impact of price regulation on the cost of capital

Camacho, Fernando T. and Menezes, Flavio M. (2013) The impact of price regulation on the cost of capital. Annals of Public and Cooperative Economics, 84 2: 139-158. doi:10.1111/apce.12007

Author Camacho, Fernando T.
Menezes, Flavio M.
Title The impact of price regulation on the cost of capital
Journal name Annals of Public and Cooperative Economics
ISSN 1370-4788
Publication date 2013
Sub-type Article (original research)
DOI 10.1111/apce.12007
Volume 84
Issue 2
Start page 139
End page 158
Total pages 20
Place of publication Chichester, West Sussex, United Kingdom
Publisher Wiley-Blackwell
Collection year 2014
Language eng
Abstract This paper investigates how price regulation under moral hazard can affect a regulated firm's cost of capital. We consider stylized versions of the two most typical regulatory frameworks that have been applied in the most recent decades by regulators: Price Cap and Cost of Service. We show that there is a trade-off between lower operational costs and a higher cost of capital under Price Cap regulation and higher operational costs and a lower cost of capital under Cost of Service regulation.
Keyword Cost of capital
Price cap regulation
Regulation and investment
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
School of Economics Publications
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Created: Wed, 15 May 2013, 11:39:38 EST by Alys Hohnen on behalf of School of Economics