Cash Flow Stability Versus Transparency: What do Investors Value about Listed Infrastructure Funds?

I analyze cash flow and transparency characteristics of listed infrastructure investment companies and funds and compare this unique infrastructure sample with a non-infrastructure reference group. I confirm the common hypothesis that infrastructure investments provide more stable cash flows than non-infrastructure investments. However, I do not find that investors positively value this cash flow stability. Instead, more volatile cash flows are valued with a premium. On the other hand, earnings management is valued with a discount. Together with a punishment for complex financial and governance structures this indicates a punishment for a lack of transparency by investors. My chapter also offers evidence that infrastructure investments in general are valued with a positive “infrastructure premium” that is not driven by more stable cash flows. I find additional evidence that sector specifics and regulatory risk play a significant role for the valuation of infrastructure investment companies and funds.