29 municipal and state owned units, limited companies and some private entities were analysed using the financial statement data for 2002-2009. The study covered water supply, roads, streets, ports, airports, railways and energy networks. The report annexes even wider empirical material.
According to the research, the cash-based returns has been very stable during the studied period (2002-2009). The volatility of the cash flows has been almost risk-free compared to investments in Finnish stock markets.
The best sectors were energy with its average annual cash-based return of 13% for the invested total capital and ports with about 10% average annual return.
The study also looked into the returns of state-owned companies. VR, the national state-owned rail operator yielded to 5% average annual cash-based return on invested capital. Accordingly Finavia, the state's airport owner returned annually 4% on average, and the state-owned road contractor Destia about 7%.
The form of ownership has a clear effect on returns. The ownership models covered traditional municipal entities, municipality and state owned companies as well as fully private units. Traditional public entities had the best cash-based returns to their owners. Municipal ports exceeded with about 4%-units the returns provided by municipal limited liability companies for the period of analysis. Difference of same magnitude was identified with waterworks.
The differences can be explained largely by different accounting practices. With limited liability companies, the accounting standards are dictated strictly by different laws and generally accepted accounting principles whereas the accounting of municipal units and enterprises follow a more liberal practice. The latter entities are mostly exempted from taxes and have more freedom to return profits to their owners. In the long run, however, these liberal practices may lead to "over-milking" of the utilities, hence resulting a risk of under-investments in infrastructures. Many municipalities and cities are concerned for example on the technical condition of water supply network.
The researchers recommend that accounting practices should be more specific in terms of reflecting the technical condition of the infrastructure and making it sure that necessary investments are not neglected while seeking high returns. On the other hand it is evident that municipalities and cities have financed some of their basic services – such as education or healthcare - with the help of revenues raised from infrastructure and utilities.
The Finnish Ministry of Finance has initiated last year a proposal to renew the legislation on municipal enterprises.Media material: Financial performance of Finnish technical networks
Pekka Leviäkangas | EurekAlert!
Win-win strategies for climate and food security
02.10.2017 | International Institute for Applied Systems Analysis (IIASA)
The personality factor: How to foster the sharing of research data
06.09.2017 | ZBW – Leibniz-Informationszentrum Wirtschaft
University of Maryland researchers contribute to historic detection of gravitational waves and light created by event
On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...
Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.
Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....
Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).
When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...
Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.
How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...
Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.
It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...
17.10.2017 | Event News
10.10.2017 | Event News
10.10.2017 | Event News
20.10.2017 | Information Technology
20.10.2017 | Materials Sciences
20.10.2017 | Interdisciplinary Research