Empirical Analysis of Capital Structure Determinants in Infrastructure Projects under Public–Private Partnerships
Publication: Journal of Construction Engineering and Management
Volume 145, Issue 5
Abstract
Public–private partnerships (PPPs) have emerged as a promising alternative to financing infrastructure projects in order to address the infrastructure restoration and rehabilitation challenge. However, in the current practice no unanimous agreement exists on what factors to consider when making capital structure decisions in PPP infrastructure projects. To close this gap, generalized least-squares (GLS) regression analysis was performed on data from 498 projects across 22 countries to identify the capital structure determinants. At the 10% significance level, three project-specific factors (number of sponsors, number of lenders, and contract type) and four country-specific factors (total tax rate, real interest rate, risk premium on lending, and bond market capitalization) were identified as critical. It contributes to the body of knowledge (1) by explaining the financial decision from the lender’s perspective, which complements common capital structure theories that focus on sponsors; and (2) by providing sponsors, lenders, and governments with knowledge on the primary factors that drive decisions, which in turn forms the base for effective negotiation and optimization of the capital structure in PPP infrastructure projects.
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Data Availability Statement
Data generated or analyzed during the study are available from the corresponding author by request. Information about the Journal’s data-sharing policy can be found here: http://ascelibrary.org/doi/10.1061/(ASCE)CO.1943-7862.0001263.
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Published In
Journal of Construction Engineering and Management
Volume 145 • Issue 5 • May 2019
Copyright
©2019 American Society of Civil Engineers.
History
Received: Mar 13, 2018
Accepted: Nov 9, 2018
Published online: Mar 14, 2019
Published in print: May 1, 2019
Discussion open until: Aug 14, 2019
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