Paying Returns to Shareholders of Water Utilities: Evidence from Italy

The debate about the role of corporations with regard to water also involves the influence that paying returns to shareholders could have on the investment policy of utilities, influencing the development of new infrastructure or the renewal of existing ones. This study investigated the dividend policy of water utilities by analyzing the data of 128 Italian firms during 2009–2014. Data show that the majority of utilities do not distribute any return to shareholders. On average, large utilities pay more frequent returns than medium-sized and small ones. Moreover, water utilities that are part of a group, multi-utilities, and those located in the center of Italy pay more frequent returns than do others. Southern firms usually do not pay returns. As expected, privately owned water utilities pay dividends more frequently and have higher returns to equity. In all the observed years, at least one-third of such utilities paid returns. Empirical results provide water regulators, water utility managers, and stakeholders with information that can impact future regulatory and managerial decisions related to management and strategic model choices in the water industry and how these decisions affect investments to improve water quality, water quantity, and/or water services.