Market valuation of regulatory assets in public utility firms

Article Abstract:

A study was conducted to investigate the market valuation of regulatory assets in rate-controlled enterprises, particularly in the public utility sector. The sample of 109 New York and American Stock Exchange firms with regulatory assets between 1984 and 1993 provided data for the study. Results showed that investors' valuation of regulatory assets is based on the regulatory context in which the utility operates. This means that there are cross-sectional valuation differences based on the market's appraisal of the probability that regulators will eventually permit the full recovery of the deferred costs. In other words, the approach used to incorporate recovery uncertainty in extant accounting valuations is different from the approach used to incorporate the same uncertainty in market valuations.

Regulation and Administration of Communications, Electric, Gas, and Other Utilities, Electric Power Generating, Electric Power Generation, Electric services, Utilities Regulation, Laws, regulations and rules, Electric utilities, Accounting and auditing, Public utilities, Utility regulations

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A perspective on the use of laboratory market experimentation in auditing research

Article Abstract:

The use of theoretical models derived from game theory and probability-agent research is examined with respect to their validity and accuracy in characterizing market equilibrium of auditing services in laboratory market research. It is suggested that more accurate alternative approaches to equilibrium analysis could be derived from competition models commonly used in insurance research. It is also suggested that equilibrium analysis may not be the best way to approach laboratory market experimentation.

Equilibrium (Economics)

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A perspective on the use of laboratory market experimentation in auditing research

Article Abstract:

The use of experimental methods in auditing research is discussed in relation to their validity in the testing of theoretical precepts involving auditing issues. It is argued that the use of experimental economics is not only valid, but extremely valuable in the field of laboratory market auditing research. It is noted, however, that these experimental methods must be employed with sufficient control and with appropriate intent if they are to provide fresh insights into key auditing issues.

Analysis, Experimental design, Research design

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