Governance, strategy and efficiency of water utilities: the Italian case

Author:

Romano Giulia1,Salvati Nicola1,Guerrini Andrea2

Affiliation:

1. Department of Economics and Management, University of Pisa, Via C. Ridolfi, 10,Pisa 56124, Italy

2. Department of Business Administration, University of Verona, Via dell'Artigliere, 19, Verona 37129, Italy

Abstract

Abstract The determinants of the performance of water utilities are a topical issue worldwide. This paper analyzes the relationship between efficiency and corporate governance in Italian water utilities, measured through data envelopment analysis. Using an M-quantile regression model, efficiency estimations are ranked considering relevant governance (board size and composition; firm size) and strategy features (membership of a corporate group; provision of wholesale services) in order to provide decision-makers with indications regarding the best corporate governance and strategic choices to improve the efficiency. Results show that fully publicly owned firms reach lower levels of efficiency than their counterparts with an ownership structure that also includes private partners. Moreover, higher levels of efficiency are reached by utilities with more than six board members and by firms in which the presence of politically connected directors is substantial (more than two-thirds of board members being politically connected). The empirical results also show that the worst situation is where the entirety or the great majority of board members are not graduates or over a certain age and where the firm size is ‘median’. Finally, being part of a group and having the opportunity to provide wholesale services to other firms contribute to improving efficiency.

Publisher

IWA Publishing

Subject

Management, Monitoring, Policy and Law,Water Science and Technology,Geography, Planning and Development

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