Public Choice

, Volume 84, Issue 1–2, pp 119–136 | Cite as

Public utility regulation and bond ratings

  • John P. Formby
  • Banamber Mishra
  • Paul D. Thistle


This paper investigates the extent to which political factors, which vary across state Public Utility Commissions, affect electric utility bond ratings. The paper focuses on the effects of the commissioner selection method (election or appointment) and other politically determined variables on bond ratings of privately owned and regulated electric utilities. The paper develops a generalization of ordered logit that allows the latent risk measure to have a skewed and thicktailed distribution. The distributional assumption underlying the standard logit model is strongly rejected. Empirically, both political variables and financial variables are determinants of electric utility bond ratings, and election of the PUC has a strong negative effect on bond ratings.


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Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • John P. Formby
    • 1
  • Banamber Mishra
    • 2
  • Paul D. Thistle
    • 3
  1. 1.Department of Economics, Finance and Legal StudiesUniversity of AlabamaTuscaloosa
  2. 2.Department of Economics and FinanceMcNeese State UniversityLake Charles
  3. 3.Department of EconomicsWestern Michigan UniversityKalamazoo

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