| Return on investment (ROI) is an important indicator for investment decisions to guide the direction of investment funds. These funds are seeking for higher profits. Not only investments in securities but also investments in industries, demanding the ROI should not be less than the expected cost of capital. The higher the ROI in an industry, the more attractable is for the capital to inflow. Meanwhile, any type of investment faces risks, and the higher the risk, the higher the ROI is to be expected.For a long period of time, the urban water services serves as a public service function, and urban water industry mainly relies on the government to realize the responsibilities of investing and financing. The accelerating development of urbanization and industrialization bringing rapid growth in demand for urban water services, but governments'revenue are limited and inadequate to meet the rapid growth of the huge investment demands. At the same time, as China's social and economic develops, institutional investors have made considerable development; they have had very strong ability to invest. From assets allocation and return enhancement perspective, these institutional investors hope to expand the invest channels; From strategic and risk management perspective, the most important decision is the entry of this market, while the industry's return characteristics is the core elements of decision-marking.Urban water industry is a major component of urban infrastructure system, the products or services have become indispensable daily necessities to the existence and survival of residents, and tap water is also essential input elements for most enterprises. ROI in water industry is stabilized with low risk and also the cash flow is better. Meanwhile, regulation is an inherent feature, which determines the urban water industry not a profiteering industry, but only a stable industry with reasonable level of profitability.With the features of large-scale and long-term investments, as well as long-term stable returns, the water industry is the ideal assets allocation choice for capital that seeks long-term and stable returns, such as pension funds and insurance.Study on the ROI in urban water industry, which plays an important theoretical and practical role for pricing and making investment decisions by institutional investors. At the same time, it could also enable to provide a theoretical draw for government to regulate the ROI in urban water industry.This study is based on the recognition of the importance which it is important for the study on ROI in water industry for institutional investors'decision-making, assets and liabilities management and capital pricing. The author tried to post the characteristics of ROI in water industry from the comparative study of yields which invest on urban water industry and fixed income securities, and innovatively studied the characteristics and the scope of regulated ROI in water industry from an empirical perspective.The author analyzed the characteristics of ROI in water industry firstly, and explained the necessity of study ROI in water industry from a theoretical perspective, and then focused on the study of regulated ROI in water industry from an empirical perspective by using CAPM and Gordon model. Finally, the author studied yields which invest on urban water and fixed income securities from a comparative perspective. |
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