Abstract
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.
Highlights
In a few instances are water utilities in many European countries, such as Italy, listed companies or owned by institutional investors
We investigate if Italian water utility shareholders received returns from their participations by examining 128 Italian water utilities during the period 2009–2014
Most Italian water utilities do not distribute any returns to shareholders and reinvest profits in self-financing
Summary
In a few instances are water utilities in many European countries, such as Italy, listed companies or owned by institutional investors. Municipalities and other public bodies totally or partially own these utilities Their payout policy—that is, the set of guidelines used to define how much of their earnings a firm will pay out to shareholders—is under scrutiny, being part of the great public–private debate that started in Italy with a 2011 referendum that attracted wide participation [1]. Owing to current budget constraints in Western economies, along with the existence of private shareholders, even shareholders such as municipalities and other public bodies could be interested in receiving returns from their participation in water utilities They will be reluctant to abandon their rights, using payouts as a “safe and steady source of financing” This issue has exposed Italy to onerous penalties and jeopardized the fulfillment of water quality objectives [7]
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