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

Author

Listed:
  • W. D. Walls

    (University of Calgary)

  • W. Schrade

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.

Suggested Citation

  • W. D. Walls & W. Schrade, "undated". "Holding companies, market liquidity, and the development of the electric power industry," Working Papers 2014-66, Department of Economics, University of Calgary, revised 23 Sep 2014.
    • Handle: RePEc:clg:wpaper:2014-66
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    Cited by:

    1. Paul G. Mahoney, 2012. "The Public Utility Pyramids," The Journal of Legal Studies, University of Chicago Press, vol. 41(1), pages 37-66.

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