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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/30461
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| Title: | | Capital structure and regulation in US local telephony: an exploratory econometric study  |
| Authors: | | Resende, Marcelo |
| Issue Date: | | 2009 |
| Series/Report no.: | | CESifo working paper 2681 |
| Abstract: | | The paper aims at empirically investigating the relationship between regulation and the capital structure of the regulated firm, A key aspect of the referred relationship pertains a leverage effect according to which debt could be increased as a response to previous physical capital investment with an ultimate goal of inducing higher rates. Theoretical models like Spiegel and Spulber [1997, RAND Journal of Economics] highlight that effect. The present paper considers a panel data set of local exchange carriers-LECs in the U.S. and investigate Granger causality between changes in long-term debt (NDEBT) and gross investment (INV) in physical capital. The evidence accruing from a dynamic panel data estimation indicates an uni-directional causality from INV to NDEBT and therefore is, to a large extent, consistent with a leverage effect and with the notion that the size of the firm´s investment project can impose a restriction on the amount of new debt. The result prevails independent of a control variable that indicates the regulatory regime. |
| Subjects: | | regulation capital structure dynamic panel data |
| JEL: | | G32 L51 L96 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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