The Cost of Capital in Regulated Firms: The Argentine Experience

Omar Chisari, Martín A. Rodríguez Pardina and Martín Rossi
Additional contact information
Martín A. Rodríguez Pardina: Universidad Argntina de la Empresa

No 8_2000, UADE Working Papers from Instituto de Economía, Universidad Argentina de la Empresa

Abstract: The sustainability of service is one of the fundamental aims of any regulatory system, and this tends to be reflected in the general principles within the legal framework of each public service. The necessity to cover economic costs of service then follows, in order to cover costs in such a way as to guarantee the maintaining and continuity of the system as well as its expansion. These economic costs should necessarily include sufficient retribution for the capital used by investors: the cost of capital. In the case of Argentine regulation, it is usual practice to use an adapted form of the CAPM (Capital Asset Pricing Model) to calculate the opportunity cost of equity, in such a way as to take the country risk into account. In this work we will analyse the components of the adapted formula for the cost of capital, discussing incentives which generate each of the possible outcomes for the regulated firms. Finally, we will present a model of dynamic optimisation for a regulated firm in a country such as Argentina.

Keywords: regulatory system; public service; CAPM; country risk (search for similar items in EconPapers)
JEL-codes: D20 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2000-05-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.uade.edu.ar/DocsDownload/Publicaciones/4_228_1622_WPS008_2000.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.uade.edu.ar/DocsDownload/Publicaciones/4_228_1622_WPS008_2000.pdf [302 Moved Temporarily]--> https://www.uade.edu.ar/DocsDownload/Publicaciones/4_228_1622_WPS008_2000.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:uadewp:2000_008

Access Statistics for this paper

More papers in UADE Working Papers from Instituto de Economía, Universidad Argentina de la Empresa Contact information at EDIRC.
Bibliographic data for series maintained by Mariano E. Gonzalez ().