We study the effect of state ownership on the market-to-book ratios of publicly traded European utilities from 1994 to 2005. We find that when the company is subject to independent regulation, state ownership seems positively associated with firm value. This relation tends to appear in countries where weak checks and balances and political fragmentation do not constrain the power of the executive. Our results suggest that, where political institutions are weak, politicians may influence regulatory agencies in order to benefit state-owned firms. Journal of Comparative Economics 41 (3) (2013) 804-828. Universita' di Torino, Dipartimento di scienze economico-sociali e matematico-statistiche, C.so Unione Sovietica 218/bis, 10134 Torino, Italy; Universita' Bocconi, Paolo Baffi Centre, Via G. Roentgen 1, 20136 Milano, Italy; Politecnico di Torino, DIGEP, Corso Duca degli Abruzzi 24, 10129 Torino, Italy. (C) 2013 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved.