Holding companies, market liquidity, and the development of the electric power industry

W. Walls and W. Schrade

No 2014-66, Working Papers from Department of Economics, University of Calgary

Abstract: We argue in this paper that economics of financial market liquidity---and not the establishment of market power---led firms in the electricity business to choose holding companies as their preferred form of organization. Our empirical analysis shows that the holding company form of organization lowered the cost of capital to the electric power industry; the cost of capital was reduced because this organizational structure securitized companies, thus creating a tradeable financial asset where none existed previously. The incentive to reduce the cost of capital in the growing electric power industry was the most significant factor in the adoption of the holding company form of organization.

Keywords: electric power industry; holding companies; utilities finance (search for similar items in EconPapers)
Date: 2014-09-23
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Citations: View citations in EconPapers (1)

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