An analysis of the relationships between ownership structure and capital structure of the global water industry
MetadataShow full item record
It is unfortunate but people over the world are living without regular access to safe drinking water. Currently, around 20% of the world’s population (1.1 billion people) have about 7% of its water. Water industry continues to suffer from global shortages, rising consumption levels and importantly, an aging infrastructure). Since water investment has been a challenging sector for making money, water markets across the globe are extending and seeking new opportunities. It is noted that the global water market is worth between US$400 and US$500 billion, including US$175 billion for municipal and industrial water and wastewater capital expenditure. There is an acute need for money and investment in water. Hence, the private sector participation is needed in the water sector but to join the investing in the water industry, private companies need to improve their capital structure. There is however little research regarding the relationships between ownership structure and capital structure of the water industry. This study examines the relationships between ownership structure and capital structure of 72 water companies that comprise the 4 water indices (WOWAX, S-NET, S&P and MSCI ACWI) over the period 2004-2014 using unbalanced panel (random effects) regression model. The findings of his study shows that investors (foreign and institutional) play an important role to effect the capital structure and investment performance. Foreign ownership affects the leverage and short term debt to asset at the 10% and 1% level of significance. However, the Institutional ownership factor does not seem to affect the leverage (LEV) and short term debt to asset (STDA). There are a number of implications for financial managers; types of financial strategies to undertake and thus, determine the optimal capital structure for ownership structure. Individual water investor can cogitate both capital structure and ownership structure when making investment decisions in water industry.
22nd International Congress on Modelling and Simulation: Managing cumulative risks through model-based processes (MODSIM2017)
© 2017 Modellling & Simulation Society of Australia & New Zealand. The attached file is reproduced here in accordance with the copyright policy of the publisher. For information about this conference please refer to the conference’s website or contact the author(s).
Numerical and Computational Mathematics not elsewhere classified