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

Moore, AlexanderStraub, StéphaneDethier, Jean-Jacques2014-02-042014-02-042013-10https://hdl.handle.net/10986/16862The 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.en-USCC BY 3.0 IGOAMOUNT OF DEBTBAILOUTSBANK POLICYBANKRUPTBANKRUPTCYBANKRUPTCY INCREASESBARRIERBENCHMARKINGBONDBOND MARKETBOND MARKET CAPITALIZATIONBOOK VALUESCAPITAL ASSETCAPITAL ASSET PRICINGCAPITAL MARKETSCAPITAL RATIOCAPITAL STRUCTURECAPITAL STRUCTURESCHAPTER 7CLAIMCLAIMANTSCONCESSIONCONCESSION CONTRACTCONCESSION CONTRACTSCONSUMER SURPLUSCONSUMERSCONTRACT RENEGOTIATIONSCORPORATE FINANCECORPORATE TAXCORPORATE TAX RATECORPORATE TAX RATESCORRUPTIONCOST OF DEBTCOST OF EQUITYCOUNTRY DUMMIESCOUNTRY RISKCURRENT ASSETSDEBTDEBT HOLDERSDEPENDENTDEPOSITDEPOSIT INTERESTDEPOSIT INTEREST RATEDEPOSIT RATEDEVELOPING COUNTRIESDEVELOPMENT BANKDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDIRECT PAYMENTDOMESTIC DEBT SECURITIESDUMMY VARIABLEEARNINGS BEFORE INTERESTECONOMETRICSEIBEMERGING MARKETEMERGING MARKETSEXCHANGE RATEEXCHANGE RATE MOVEMENTSEXISTING DEBTEXPOSUREEXTERNAL INVESTORSFINANCIAL CORPORATIONFINANCIAL DATAFINANCIAL DEVELOPMENTFINANCIAL DIFFICULTYFINANCIAL DISTRESSFINANCIAL INSTITUTIONSFINANCIAL MANAGEMENTFINANCIAL PERFORMANCEFINANCIAL STATEMENTSFINANCIERSGDPGDP DEFLATORGOVERNMENT ACTIONGOVERNMENT GUARANTEEGOVERNMENT GUARANTEESHIGHLY LEVERAGED FIRMSINCENTIVE STRUCTUREINCOMEINCOME DISTRIBUTIONINFLATIONINFRASTRUCTURE CONCESSIONSINFRASTRUCTURE FINANCEINFRASTRUCTURE PROJECTSINSTITUTIONAL INVESTORINSURANCEINTEREST RATE SPREADINTERNAL RATE OF RETURNINTERNATIONAL BANKINTERNATIONAL FINANCIAL STATISTICSLEASE AGREEMENTSLEGISLATIONLENDERSLENDING INTEREST RATELEVEL OF DEBTLEVELS OF DEBTLEVERAGELIQUIDITYLIQUIDITY PROBLEMSMARKET PORTFOLIOMARKET RISKMARKET VALUEMARKETS DATABASEMORAL HAZARDORIGINAL CONTRACTSOUTPUTPAYOFFPAYOFFSPOLITICAL RISKPORTFOLIOPOTENTIAL INVESTORSPRICE CAPPRICE CAP REGULATIONPRICE CAPSPRICE SETTINGPRIVATE BONDPRIVATE CAPITALPRIVATE DOMESTIC DEBTPRIVATE INFRASTRUCTUREPRIVATE INVESTORSPROBABILITY OF BANKRUPTCYPROCUREMENTPRODUCTIVITYPROFITABILITYPUBLIC-PRIVATE PARTNERSHIPSRATE OF RETURNREAL ASSETSREAL GDPREGULATORREGULATORSREGULATORY AGENCIESREGULATORY AGENCYREGULATORY ENVIRONMENTREGULATORY GOVERNANCEREGULATORY REGIMEREGULATORY REGIMESREGULATORY STRUCTURERENEGOTIATIONRENEGOTIATION PROCESSRESIDUAL CLAIMANTSRETURNRETURN ON ASSETSRETURNSRISK AVERSERISK NEUTRALROAD TOLLSSAVINGSSHAREHOLDERSSTOCK MARKETSTOCK MARKETSTAXTAX ADVANTAGE OF DEBTTAX RATESTHREAT OF BANKRUPTCYTRANSPORTVARIABLE RATEVOLATILITYWORKING CAPITALWORLD DEVELOPMENT INDICATORSRegulation, Renegotiation and Capital Structure : Theory and Evidence from Latin American Transport ConcessionsWorld Bank10.1596/1813-9450-6646