Regulation and systematic risk: the case of the water industry in England and Wales

This article examines whether regulatory announcements relating to competition, pricing policy and the quality of service in the water industry in England and Wales have an impact on the industry's systematic risk. The results indicate that, although the long-run overall effect of regulation on systematic risk appears to be negligible, competition and quality announcements can have a significant impact upon the industry's systematic risk. Further analysis of individual announcements and companies suggests that price announcements also significantly affect individual companies’ systematic risk, although not in a uniform manner. This indicates that regulators need to be aware that, while some of their policy decisions tend to affect the industry as a whole, others have a diverse impact on individual companies.