Regulated Firm (regulated + firm)

Distribution by Scientific Domains
Distribution within Business, Economics, Finance and Accounting


Selected Abstracts


Regulated Firms with Transboundary Pollution: Does International Competition Improve Efficiency?

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 3 2003
Isabelle Péchoux
We consider a model of strategic trade and environmental policies with transboundary pollution. A regulated monopoly produces in each country and emits pollution. Under complete information, opening borders leads to a reallocation of the production from the large country to the small one. Total production increases, leading to an increase in the total level of pollution. The creation of a common market sometimes leads to a deterioration of total welfare. Under asymmetric information, the international competition generated by the common market decreases the informational rents of the firms, thereby reinforcing the potential gain to open markets to international competition. [source]


Regulating a Monopolist with Unknown Demand: Costly Public Funds and the Value of Private Information

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 5 2004
Iñaki Aguirre
In this paper, we analyze the optimal regulation policy when the regulated firm has better information concerning the market demand than the regulator. We show that introducing a cost on public funds into the Planner's objective function does not lead to qualitative results similar to those obtained by introducing distributional considerations. In particular we show that under constant marginal cost the full information policy is not implementable and that the optimal regulatory policy results in informational rents. The social value of private information and the firm's informational rents are both increasing functions of the cost of the public funds. [source]


RETAIL PRICE REGULATION AND THE OPTION TO DELAY

ANNALS OF PUBLIC AND COOPERATIVE ECONOMICS, Issue 3 2009
Fernando T. Camacho
ABSTRACT,:,This paper examines a two-period model of an investment decision in a network industry characterized by demand uncertainty, economies of scale and sunk costs. In the absence of regulation we identify the market conditions under which a monopolist decides to invest early as well as the underlying overall welfare output. In a regulated environment, we consider a monopolist who faces no downstream (final good) competition but is subject to retail price regulation. We identify the welfare-maximizing regulated prices when the unregulated market outcome is set as the benchmark. We show that if the regulator can commit to ex post regulation , that is, regulated prices that are contingent to future demand realization , then regulated prices that allow the firm to recover its total costs of production are welfare-maximizing. Thus, under ex post price regulation there is no need to compensate the regulated firm for the option to delay that it foregoes when investing today. We argue, however, that regulators cannot make this type of commitment and, therefore, price regulation is often ex ante , that is, regulated prices are not contingent to future demand. We show that the optimal ex ante regulation, and the extent to which regulated prices need to incorporate an option to delay, depend on the nature of demand uncertainty. [source]


QUALITY-CORRECTED PRICE CAPS

BULLETIN OF ECONOMIC RESEARCH, Issue 3 2007
Kevin M. Currier
L43; L51 ABSTRACT Although price caps have desirable efficiency properties, it is well known that they may create incentives for a regulated firm to attempt to lower its costs via reductions in service quality. Thus, the regulators often employ quality standards or other methods designed to have allowed prices reflect delivered service quality levels. In this paper, we present a system of quality-corrected price caps that results in efficient pricing and quality provision. [source]


Separation of Regulatory Powers When Contracts Are Incomplete

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 2 2010
DAVID BARTOLINI
The investment of a regulated firm affects the service/good provided on many dimensions. Should an integrated regulator take care of them all? Or is it better to have separate regulators responsible for them? We analyze the effect of the separation of regulatory powers on the regulated firm's,ex ante,incentive to invest in a "cooperative" innovation. The effects of the innovation are not verifiable and the cost of investing is sunk, hence, there is a problem of hold-up. We find that when the innovation produces opposite effects the,ex ante,firm's incentive to invest is larger in the case of separation than in the case of integrated regulation. We also stress the risk of over-investment that the separation of regulatory powers may induce. We maintain that along with classical incentive regulation,which mainly provides incentives for the firm to be efficient,the separation of regulatory powers may play a role in providing an incentive for cooperative innovations. [source]


The Underpricing of Insurance IPOs

FINANCIAL MANAGEMENT, Issue 2 2009
Qiming Wang
The previous literature documents that insurance initial public offerings (IPOs) are less underpriced than those of noninsurance firms. This difference is usually attributed to lower information asymmetry for regulated firms. However, we find that once one controls for the file price adjustment insurance IPOs, both stock and mutual, are no less underpriced than other noninsurance offerings suggesting the book-building process resolves any such information asymmetries. We also find that mutual IPOs appear more underpriced than stock insurance IPOs, but this difference is related to the differences in pre-issue managerial ownership. [source]


Information disclosure and environmental regulation: Green lights and gray areas

REGULATION & GOVERNANCE, Issue 3 2010
Eungkyoon Lee
Abstract This research examines the potential of information disclosure for environmental regulation. The research attempts to answer questions of what impact information disclosure has on corporate environmental practices and what interferes with its effective use. A case study of Indonesia's pioneering informational environmental regulation reveals (i) both indirect (e.g. anticipation of external pressure) and direct (e.g. internal learning support) informational effects that enhance environmental awareness at the top management level and stimulate changes in production processes and (ii) detrimental effects of disclosed information that maintain or strengthen the extant power of regulated firms over environmental groups and local communities affected. Regulatory efforts can be leveraged by public disclosure of information regarding firms' environmental performance, especially where the state monitoring and enforcement capacities are weak. However, the introduction of policies of this kind without consideration of different market conditions and political and administrative culture may impede the effectiveness of this potentially useful regulatory method. [source]


CAPITAL STRUCTURE, SHAREHOLDER RIGHTS, AND CORPORATE GOVERNANCE

THE JOURNAL OF FINANCIAL RESEARCH, Issue 1 2007
Pornsit Jiraporn
Abstract We show how capital structure is influenced by the strength of shareholder rights. Our empirical evidence shows an inverse relation between leverage and shareholder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relation, however, is not found in regulated firms (i.e., utilities). We contend that this is because regulation already helps alleviate agency conflicts and, hence, mitigates the role of leverage in controlling agency costs. [source]