Regulation, Renegotiation and Capital Structure : Theory and Evidence from Latin American Transport Concessions

The paper examines the capital structure of regulated infrastructure firms. The authors develop a model showing that leverage, the ratio of liabilities to assets, is lower under high-powered regulation and that firms operating under high-powered regulation make proportionally larger reductions in leverage when the cost of debt increases. They test the predictions of the model using an original panel dataset of 124 transport concessions in Brazil, Chile, Colombia and Peru over 1992-2011, finding broad support for our predictions.

Bibliographic Details

Main Authors:	Moore, Alexander, Straub, Stéphane, Dethier, Jean-Jacques
Language:	English en_US
Published:	World Bank, Washington, DC 2013-10
Subjects:	AMOUNT OF DEBT, BAILOUTS, BANK POLICY, BANKRUPT, BANKRUPTCY, BANKRUPTCY INCREASES, BARRIER, BENCHMARKING, BOND, BOND MARKET, BOND MARKET CAPITALIZATION, BOOK VALUES, CAPITAL ASSET, CAPITAL ASSET PRICING, CAPITAL MARKETS, CAPITAL RATIO, CAPITAL STRUCTURE, CAPITAL STRUCTURES, CHAPTER 7, CLAIM, CLAIMANTS, CONCESSION, CONCESSION CONTRACT, CONCESSION CONTRACTS, CONSUMER SURPLUS, CONSUMERS, CONTRACT RENEGOTIATIONS, CORPORATE FINANCE, CORPORATE TAX, CORPORATE TAX RATE, CORPORATE TAX RATES, CORRUPTION, COST OF DEBT, COST OF EQUITY, COUNTRY DUMMIES, COUNTRY RISK, CURRENT ASSETS, DEBT, DEBT HOLDERS, DEPENDENT, DEPOSIT, DEPOSIT INTEREST, DEPOSIT INTEREST RATE, DEPOSIT RATE, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIRECT PAYMENT, DOMESTIC DEBT SECURITIES, DUMMY VARIABLE, EARNINGS BEFORE INTEREST, ECONOMETRICS, EIB, EMERGING MARKET, EMERGING MARKETS, EXCHANGE RATE, EXCHANGE RATE MOVEMENTS, EXISTING DEBT, EXPOSURE, EXTERNAL INVESTORS, FINANCIAL CORPORATION, FINANCIAL DATA, FINANCIAL DEVELOPMENT, FINANCIAL DIFFICULTY, FINANCIAL DISTRESS, FINANCIAL INSTITUTIONS, FINANCIAL MANAGEMENT, FINANCIAL PERFORMANCE, FINANCIAL STATEMENTS, FINANCIERS, GDP, GDP DEFLATOR, GOVERNMENT ACTION, GOVERNMENT GUARANTEE, GOVERNMENT GUARANTEES, HIGHLY LEVERAGED FIRMS, INCENTIVE STRUCTURE, INCOME, INCOME DISTRIBUTION, INFLATION, INFRASTRUCTURE CONCESSIONS, INFRASTRUCTURE FINANCE, INFRASTRUCTURE PROJECTS, INSTITUTIONAL INVESTOR, INSURANCE, INTEREST RATE SPREAD, INTERNAL RATE OF RETURN, INTERNATIONAL BANK, INTERNATIONAL FINANCIAL STATISTICS, LEASE AGREEMENTS, LEGISLATION, LENDERS, LENDING INTEREST RATE, LEVEL OF DEBT, LEVELS OF DEBT, LEVERAGE, LIQUIDITY, LIQUIDITY PROBLEMS, MARKET PORTFOLIO, MARKET RISK, MARKET VALUE, MARKETS DATABASE, MORAL HAZARD, ORIGINAL CONTRACTS, OUTPUT, PAYOFF, PAYOFFS, POLITICAL RISK, PORTFOLIO, POTENTIAL INVESTORS, PRICE CAP, PRICE CAP REGULATION, PRICE CAPS, PRICE SETTING, PRIVATE BOND, PRIVATE CAPITAL, PRIVATE DOMESTIC DEBT, PRIVATE INFRASTRUCTURE, PRIVATE INVESTORS, PROBABILITY OF BANKRUPTCY, PROCUREMENT, PRODUCTIVITY, PROFITABILITY, PUBLIC-PRIVATE PARTNERSHIPS, RATE OF RETURN, REAL ASSETS, REAL GDP, REGULATOR, REGULATORS, REGULATORY AGENCIES, REGULATORY AGENCY, REGULATORY ENVIRONMENT, REGULATORY GOVERNANCE, REGULATORY REGIME, REGULATORY REGIMES, REGULATORY STRUCTURE, RENEGOTIATION, RENEGOTIATION PROCESS, RESIDUAL CLAIMANTS, RETURN, RETURN ON ASSETS, RETURNS, RISK AVERSE, RISK NEUTRAL, ROAD TOLLS, SAVINGS, SHAREHOLDERS, STOCK MARKET, STOCK MARKETS, TAX, TAX ADVANTAGE OF DEBT, TAX RATES, THREAT OF BANKRUPTCY, TRANSPORT, VARIABLE RATE, VOLATILITY, WORKING CAPITAL, WORLD DEVELOPMENT INDICATORS,
Online Access:	http://documents.worldbank.org/curated/en/2013/10/18366114/regulation-renegotiation-capital-structure-theory-evidence-latin-american-transport-concessions https://hdl.handle.net/10986/16862
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