Skip to Main Navigation

Regulation, renegotiation and capital structure : theory and evidence from Latin American transport concessions (English)

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.


  • Author

    Moore, Alexander Straub, Stephane Dethier, Jean-Jacques

  • Document Date


  • Document Type

    Policy Research Working Paper

  • Report Number


  • Volume No


  • Total Volume(s)


  • Country





  • Region

    Latin America & Caribbean,

  • Disclosure Date


  • Disclosure Status


  • Doc Name

    Regulation, renegotiation and capital structure : theory and evidence from Latin American transport concessions

  • Keywords

    capital structure;Earnings Before Interest and Taxes;price cap;cost of debt;tax advantage of debt;Internal rate of return;lending interest rate;probability of bankruptcy;minimum income guarantee;cost of equity;public-private partnership;journal of finance;price of debt;world development indicator;stock market;corporate tax rate;fixed price contract;design of regulation;effect of price;debt over equity;return on asset;price cap regulation;volume of investment;rate of inflation;annual tariff adjustment;types of regulation;exchange rate movement;volatility of revenues;amount of debt;private domestic debt;exchange rate shock;increase tariff;Special Purpose Vehicle;variable rate debt;deposit interest rate;threat of bankruptcy;project finance transaction;independent regulatory agency;price cap regime;prudent financial management;capital structure decisions;public private partnership;standard deviation;financial distress;regulatory regime;price setting;fixed effect;financial difficulties;standard error;natural logarithm;government guarantee;financial variable;performance variable;moral hazard;financial datum;federal road;corporate finance;leverage ratio;transport concession;regulatory design;Market Risk;price regulation;working capital;potential investor;government corruption;incentive structure;project sponsor;contract clause;real asset;summary statistic;automatic tariff;infrastructure concession;contract renegotiation;infrastructure provider;book value;highway concession;transport economics;regulatory independence;exogenous changes;regulatory governance;management strategy;toll revenue;utility capital;regulatory implication;empirical evidence;infrastructure policy;utility policy;empirical study;utility industry;regulatory risk;investment obligation;financial decision;deposit rate;market capitalization;real gdp;private capital;Public Goods;contract variables;lease agreement;risk averse;debt exposure;firm profitability;environmental legislation;lending rate;government action;private bond;existing debt;local resident;road toll;Toll Road;risk allocation;taxpayer bailout;infrastructure industry;reduced tariffs;transportation engineering;business research;tariff review;empirical specification;original contract;empirical findings;alternative possibility;risk preference;market portfolio;high probability;renegotiation process;tariff change;contract signing;direct payment;tariff proposal;regulatory environment;regulatory commitment;risk neutral;strategic research;federal level;residual claimant;empirical work;empirical application;regulatory discretion;water regulation;regulatory rule;demand function;input price;bankruptcy cost;external investor;securities issue;debt holder;high frequency;research assistance;open access;incomplete contract;infrastructure investor;financial statement;development policy;country risk;private investor;environmental characteristic;indicator function;gdp deflator;contract length;regulatory outcome;contract duration;productivity gain;investment commitment;price review;high power;regulatory information;tariff revision;tax variable;political motive;negative coefficient;liquidity problem;supply-side constraints;supply side;



Official version of document (may contain signatures, etc)

  • Official PDF
  • TXT*
  • Total Downloads** :
  • Download Stats
  • *The text version is uncorrected OCR text and is included solely to benefit users with slow connectivity.


Moore, Alexander Straub, Stephane Dethier, Jean-Jacques

Regulation, renegotiation and capital structure : theory and evidence from Latin American transport concessions (English). Policy Research working paper ; no. WPS 6646 Washington, D.C. : World Bank Group.