Risk Acceptance and Regulatory Risk

M. Rammerstorfer

Competition and Regulation in Network Industries, 2009, vol. 10, issue 3, 235-259

Abstract: The current debate among policy makers, regulatory analysts, and industry concerns the insufficient investment activities within the area of regulated utilities and emphasises the necessity of analyzing the interdependencies between systematic risk and regulatory activities. This article deals with the different extents of systematic risk under different regulatory regimes. First, it is shown that price cap regulation provides higher systematic risk than incentive regulation or no-regulation. In a second step, the extent of risk aversion of regulated companies is analyzed. It turns out that an unregulated company chooses the investment project with the highest expected return, whereas regulated companies primarily focus on risk prevention.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sen:journl:v:10:i:3:y:2009:p:235-259

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