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Profit change and its drivers in the English and Welsh water industry: is output quality important?
journal contribution
posted on 2016-07-11, 11:58 authored by Alexandros Maziotis, David SaalDavid Saal, Emmanuel Thanassoulis, Maria Molinos-SenanteThe assessment of the profit change over time and its drivers is essential to analyse firms’ financial performance.
This paper investigates profit change and its components for the 10 English and Welsh water and
sewerage water companies over the period 1991–2008 and three regulatory sub-periods. Profit changes and
their drivers are computed following two approaches, namely without controlling for water and sewerage quality
issues and after decomposing the output effect into high quality and low quality output effect. In both cases, profit
change is decomposed into various factors such as quantity and price effect, technical change, efficiency change,
resource mix, product mix, and scale effect. Profit change over the whole period was negative; with the substantial
negative price effect being the main driver, which outstripped the positive quantity effect. This negative profit
change was significantly marked from 2000 to 2005 while in the sub-period 1994–2000, which covers the
1994 price review, the profit change was positive. A further decomposition illustrated the significant negative
impact of the input price and scale effects on profit changes. The methodology and conclusions of this paper
are of great interest for both regulators and water utilities managers to improve future performance.
Funding
The authors would like to express their gratitude for the support of the Economic and Social Science Research Council as well as the Office of Water Services (Ofwat). María Molinos-Senante would like to thank Generalitat Valenciana (APOSTD/2013/110) for financial support.
History
School
- Business and Economics
Department
- Economics
Published in
Water PolicyCitation
MAZIOTIS, A. ... et al, 2014. Profit change and its drivers in the English and Welsh water industry: is output quality important?. Water Policy, 18 (3), wp2014151Publisher
© IWA PublishingVersion
- VoR (Version of Record)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Acceptance date
2014-10-07Publication date
2014Notes
This paper is closed access.ISSN
1366-7017Publisher version
Language
- es