Government's impact on the financial performance of electric service providers as both regulator and shareholder

• Published in: Utilities policy Vol. 55; pp. 142 - 150
• Main Authors: Loch, Murialdo, Marcon, Rosilene, Pruner da Silva, André Leonardo, Xavier, Wlamir Gonçalves
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-12-2018
• Subjects: Corporate governance; Government as shareholder; Regulated sectors; Corporate governance; Regulated sectors; Government as shareholder
• ISSN: 0957-1787; 1878-4356
• DOI: 10.1016/j.jup.2018.09.007

This study examines how the government affects the financial performance of utility companies, both as a regulator and shareholder. We address government-led legislative changes affecting the electricity sector, privatization initiatives, and state interventionism in an emerging market country during the period 2010–2015, when the electricity sector was subjected to an exogenous shock. Working within an institutional economics framework, we hypothesize about government influence on the financial performance of electricity providers. Using the differences in differences (diff-in-diff) technique as a regression model for fixed-effects of panel data, we found support for our hypothesis.
•Principal-Principal (PP) conflict is a type of ownership conflict that is particularly typical of emerging economies. It the focus of research into agency issues onto conflicts occurring between minority and majority shareholders.•From this perspective, shareholders' identities have greater implications for the owner’s objectives when it exercises its power in the firm's strategic decision-making and for the means through which it does this.•The Brazilian electricity industry provides the setting for a natural experiment that enables us to investigate the dual role of the state as concession grantor (regulator) and owner (shareholder) and its effect on the financial performance of electricity providers.•The tests that were carried out yielded results showing that the government's impact on the performance of firms in the Brazilian Power Sector (BPS), both as a shareholder and regulator, was negative when compared to the impact of other shareholders.