Abstract
This paper develops a unique indicator to identify the financial situation of firms in the electric sector in Brazil. The National Electric Energy Agency (ANEEL) regulates this sector through five dimensions: indebtedness, efficiency, investment, profitability, and pay-out ratio. Each of these dimensions contains one or two indicators. Based on these indicators, we develop a unique indicator that shows companies' financial situation. To create a unique indicator, we follow the idea of Altman’s solvency indicator. But, we use a logit regression. Our dependent variable is Global Performance of Continuity which indicates the financial situation of the firm. Our independent variables are based on the five dimensions of the ANEEL indicators for financial situation. We collect data from 2011 to 2018. This research follows three main steps: (1) Collection of the data from the ANEEL database; (2) Creation of variables based on ANEEL’s five dimensions of performance; and (3) Econometric proceedings with variables according to ANEEL’s data and indicators of each dimension. First, we estimate one regression with all variables created based on ANEEL’s five dimensions. Then, we make improvements to find a more suitable model with different combinations of variables. We chose the best model by analysing the Akaike information criterion (AIC). Our results show that the unique indicator we create to evaluate firm performance is based on Debt, Efficiency, Investment (CapexA) and the Pay-out Ratio.
Highlights
The National Electric Energy Agency (ANEEL) of Brazil analyses the situation of firms by regulating their financial accounts
ANEEL is responsible for regulating the electric sector in Brazil and analyses firms based on their service performance compared to their financial performance
We develop a unique indicator by using a logit regression and its betas and signs of the coefficients of the variables included in the “ideal” model
Summary
The National Electric Energy Agency (ANEEL) of Brazil analyses the situation of firms by regulating their financial accounts. ANEEL is responsible for regulating the electric sector in Brazil and analyses firms based on their service performance compared to their financial performance. Between 2011 and 2018, ANEEL developed some ways to regulate the financial situation of distributor, generator, and transmitter firms, distributer firms. One way to regulate these firms is by analyzing their financial viability. ANEEL analyses financial viability by supervising the electric sector using models or systematics of supervision that make up the dimensions of evaluation of financial viability (e.g., financial and operational). In 2016, ANEEL released the technical note “Nota Técnica 111/2016” (NT 111/2016), which presents the new regulation modeling. NT shows different dimensions of performance indicators
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