Risks and the financing of PPP: Perspectives from the financiers

Public private partnerships (PPP) are an established model for most governments internationally to provide infrastructure-based services, using private finance. Typically the public authority will sign a contract with a special purpose vehicle (SPV), which, because of the holistic nature of PPP, in turn sub-contracts the finance, design, construction, maintenance and soft services to companies that are often related to its shareholders. Thus there is a considerable network of linked organisations that together procure and provide the PPP project.While there is an increasing body of research that examines these PPP projects, much of it is interview or case study based so that the evidence is drawn from a small number of interviews or cases in specific sectors. It also focuses on the public sector procurer and the private sector contractor in the network of organisations. Although it has been recognised that the perceptions of the financiers may vary from those of other key PPP players there is much less research that focuses on the financiers.In this paper we report the results of a postal questionnaire survey, administered to 109 providers of senior debt and equity, from which the response rate was just less than 40%. We supplement these findings with a small number of illustrative quotes from interviewees, where the cited quote represents a commonly held view. We used SPSS and Nvivo to analyse the data.The findings show that when assessing PPPs financiers perceive a very wide range of risks as important, and that it is important to them that many of these risks are either insured or allocated to sub-contractors. When considering participating in PPPs, financiers agree that working with familiar partners on familiar projects and in familiar sectors is important, which may raise barriers to entry and undermine competitive processes.     

An empirical study of research and development top managers' perceptions of short-term pressures from capital markets in the United Kingdom

It is often argued that capital market pressures are increasingly directed towards short-term performance evaluation of managers and their operations. Whether these external capital market pressures actually exist or not, short-term pressures on firms are influenced by managers' own perceptions of these external pressures. If managers perceive the existence of these external pressures it is likely that this will lead to short-term behaviour on their part. The purpose of this paper is therefore to examine (a) research and development (R&D) managers' perceptions of short-term behaviour in capital markets in the UK, and (b) patterns of behaviour relating to R&D which may be influenced by these perceptions. The findings of this study indicate that approximately half of the UK research and development managers perceive capital markets as responsible for putting inappropriate short-term pressures on their companies' management. However, an even larger proportion report short-termist behaviour relating to R&D and its evaluation, suggesting that some at least of the problem of ‘short-termism’ is internally generated.     

Risk management by SPV partners in toll road public private partnerships

ABSTRACT

Research on risk management in Public Private Partnerships (PPPs) has largely overlooked that the Special Purpose Vehicle (SPV) is made up of several project partners with different interests and objectives to manage risk. This paper makes an important contribution to this literature as it articulates SPV partners’ perceptions of how they manage risk in toll road PPPs. Our case studies show that the different skillsets of both the international and domestic partners with their sub-contractors provide opportunities for mitigating and managing risk but also pose potential problems in terms of measuring and obtaining value for money for taxpayers.     

Trends in market reactions: stock dividends and rights offerings at Istanbul stock exchange

This paper examines the existence of different price reactions to the implementation of stock dividends and rights offerings as the stock market matures over time and the investor mix changes. For that purpose market reactions at the Istanbul Stock Exchange (ISE) are Investigated during three sub-periods displaying different developmental phases of the market defined in terms of institutional framework, transactions volumes and related investor profiles. Differences in price reactions and the accompanying trading volumes are tested as the investor mix changes and small investors enter ISE due to the cultivating of awareness about the stock market. Other possible causes of excess returns such as prior knowledge about the stocks being traded or a preferred trading range are also tested. Considering the characteristics of thinly traded emerging markets, non-parametric tests are employed besides traditional event study methodology and results are immune to the choice of relevant test statistics. The results indicate that the changing mix of investors shift the timing of market reaction from announcement to implementation of stock dividends and rights offerings. Since individual investors, who are attracted by lower relative prices, are not expected to be prompt in timing, excess returns persist over longer event windows and are accompanied by increasing trading volumes.     

ACCOUNTABILITY AND VALUE FOR MONEY IN PRIVATE FINANCE INITIATIVE CONTRACTS

Within the context of New Public Management (NPM), successive UK governments have claimed that PFI projects provide more accountability, and arguably, more value for money (VFM) than conventional procurement for the public ( HM Treasury 1995, 2000, 2003a and 2003b ). However, recent empirical research in the UK on PFI has indicated its potential limitations for accountability and VFM ( Broadbent, Gill and Laughlin, 2004 ; Edwards, Shaoul, Stafford and Arblaster, 2004 ; Shaoul, 2005 ; and Ismail and Pendlebury, 2006 ) albeit these are based on either published accounts or a limited number of key stakeholders. This paper attempts to partially redress this gap in the literature by presenting an interesting case of the impact of PFI on accountability and VFM in Northern Ireland's education sector. The findings of this research, based on forty two interviews with a wide range of key stakeholders, suggest that stakeholders have different and often conflicting expectations and the actual PFI accountability and VFM benefits are much more obfuscated than those claimed in Government publications.     

ACCOUNTING FOR FINANCIAL AND MANAGERIAL CAUSES OF SHORT-TERM PRESSURES IN BRITISH CORPORATIONS

Short-term pressures are defined and a distinction drawn between external S-TP, mainly from shareholders, and internal S-TP, from top management. A conceptual framework for analysing S-TP is developed and empirical evidence for their existence reviewed. Although certain crude formulations of the argument for short-termism are rejected, evidence is found for the existence of both types of S-TP in the UK. Variations in their intensity among sectors can be accounted for partly by inherent differences in technology, and partly by differences in the behaviour of firms. Excessive diversification, particularly by acquisition, exacerbates S-TP.     

Costs,outputs and outcomes in school PFI contracts and the significance of project size

This article examines operational Private Finance Initiative (PFI) school projects and reports the experiences of UK headteachers. It considers the impact of project size on value for money (VFM). Headteachers involved in small projects are more satisfied with costs than those involved in large projects, but headteachers involved in larger projects are more satisfied with affordability. Generally, heads are more satisfied with the buildings than with the services. The authors question the government's recent policy changes to increase the size of PFI projects.     

Multinational Performance Measures and Their Association with Contextual Variables

Demirag (1986, 1987) has shown that UK multinational corporations (MNCs) are ‘local currency oriented’ in evaluating their foreign subsidiary operations and their managers. The purpose of this study is to investigate the relationships between the foreign currency orientation of UK MNCs in their internal performance measures, and a number of contextual variables. The contextual variables examined include: the size of the firm, organisational structure, the locus of decision making, the industry groups and the operating environments of the firms. The results of this study fail to confirm the expectations derived from the literature and prior research.