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An Econometric Analysis of Energy Financing

Abstract:
This study examines the interdependencies of the dividend, investment, liquidity, and financing decisions of public utility firms during the 1974-1979 period and develops a multiple-criteria financial planning model of a public utility firm. The evidence on the perfect markets hypothesis that the dividend, investment, and new debt decisions of firms are interdependent is mixed. The perfect markets hypothesis is tested using a sample of public utility firms because utility firms pay very high dividends (relative to stock prices) and engage in large capital expenditures (relative to assets) compared with manufacturing firms.

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Energy Specializations: Energy Investment and Finance – Public and Private Risks, Risk Management; Energy Modeling – Other

JEL Codes: G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity, G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, D22: Firm Behavior: Empirical Analysis, L95: Gas Utilities; Pipelines; Water Utilities, L94: Electric Utilities, Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, D21: Firm Behavior: Theory

Keywords: Energy financing, Econometric analysis, Public utilities

DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No2-5


Published in Volume 10, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.