Public‐Private Partnerships: Form Over Substance?

Public-private partnerships have been devised to avoid treating financing arrangements as government "debt". Governments face incentives to avoid treating these arrangements as giving rise to liabilities. Both the Australian and UK standards boards have avoided a "substance over form" approach in order to accept that PPPs may be kept off-balance-sheet. The analysis supporting their conclusions was based on consideration of whether PPPs led to the acquisition of an asset, using the analogy of accounting for finance leases, rather than addressing whether the substance of commercial arrangements means that contractual commitments may evolve into liabilities.     

Risk Management in Public–Private Partnerships

This study investigates the risk management in long‐term concession contracts known as public–private partnerships (PPPs). The M4 is the first Australian PPP road concession to reach the end of its concession cycle. It provides a unique and timely opportunity to examine the risk management process over its contract term and the efficacy of PPP contractual structures in managing uncertainties. Our specific research interests focus on two questions. First, what risk management approach was implemented? Second, has the risk‐allocation strategy defined in the contract facilitated or hindered the risk management process? The findings of the study suggest that under the incomplete contract approach, the risk management practices rooted in a strong contractual framework, allied with good relationship skills, has contributed to a positive outcome for the M4 PPP. The study provides generalisable insights into risk management in inter‐organisational long‐term contracts.     

Value for Money and Risk Relationships in Public–Private Partnerships: Evaluating Program‐based Evidence

Value for money – VfM (the provision of improved public infrastructure and services at lower cost) – is a central rationale for the deployment of public–private partnerships (P3s). However, it remains unclear how VfM is actually created in P3s. There are several issues that surround the ex ante evaluation conducted during P3 assessment, including: transparency of the process, engagement of stakeholders, potential restrictions on current and future public sector flexibility, and political influences that call into question the legitimacy of the process. This study examines these issues using Alberta's P3 projects executed since 2003, and interviews 35 key participants and stakeholders. The findings suggest that while the transfer of risk from the public to the private sector is a key driver of VfM, it may overstate the extent to which planning related risks can be transferred. This paper recommends enhanced VfM component disclosures and transparency as the evaluation process evolves. Furthermore, a more rigorous approach to risk conceptualisation and valuation should be adopted. Risk allocation should be about managing not only occurrence, but also impact of the risk factor. Finally, political interference must be moderated to allow for the optimal realisation of the best possible choices presented by P3 deployments.     

Infrastructure Public‐Private Partnerships: “Partnerships” Come to Fruition

P3s are generally structured as long‐term leases of municipal assets like toll roads, ports, and airports by private investors/operators. Five years ago, municipalities viewed such partnerships primarily as a means of raising capital, and they often viewed maximizing the up‐front proceeds as the primary goal of the transactions. Today's P3s have been re‐defined to focus beyond the bottom line and toward the goal of developing sustainable long‐term partnerships between the public and private sectors. As three transactions from the past year are used to demonstrate, the P3 has emerged as a way for governments to achieve sustainable reinvestment in needed infrastructure while also using the best practices of the private sector to increase the efficiency of and revenue from their asset operations.     

Global Public‐Private Investment Partnerships: A Financing Innovation with Positive Social Impact

Global bond markets, along with banks and governments, are the main source of funding for investment in environmentally friendly infrastructure and the transition to clean energy. Although such bonds are a relatively recent innovation, the green bond market has grown rapidly from its start in 2008 to around $800 billion in outstanding issues. The problem, however, is that green bonds, which represent less than 1% of global bond markets, have been issued disproportionately by government‐sponsored entities, corporations, and municipalities in developed markets. In the emerging market countries where the infrastructure investments are most needed, they barely exist. The authors describe a new investment vehicle, called the AP EGO fund, whose mission and MO are to channel the vast global pools of institutional savings that are now invested in low or (even negative) yield fixed‐income assets—as much as $17 trillion in 2019—to higher‐return emerging markets green investments, in particular sustainable infrastructure, by creating a new asset class: emerging‐market green bonds issued by banks. The AP EGO fund is premised on and involves a reworking of the public‐private partnership (PPP) into a form they call the global public‐private investment partnership (or GPPIP). Unlike the PPP, which combines a public agency with a private operator, the GPPIP has four instead of just two partners. In addition to the standard public agency and the private concession operator, there is a development bank—in this case the International Finance Corporation (IFC), which is the financial markets affiliate of the World Bank—and private investors that include emerging‐market banks as well as global institutional investors. Along with the mediating role played by a public agency like the IFC, the AP EGO Fund is fundamentally different from other PPPs in that it takes the form of a special purpose securitization vehicle whose shares are backed by a pool of green bonds issued by emerging market banks in multiple emerging market countries. And besides its application to a new asset class, the fund also breaks new ground by applying a securitization technique with a fund structure designed with an embedded “first‐loss” protection to a global pool of green bonds originated in emerging market economies. By means of this structuring, the green‐bond‐backed fund shares issued by the AP EGO are now providing developed market institutional investors with somewhat higher‐yielding fixed income securities that nevertheless carry an investment‐grade rating.     

Management Controls in Public–Private Partnerships: An Analytical Framework

Drawing on transaction cost economics and organisational theory, this paper proposes a framework to analyse management controls in Public–Private Partnerships (PPPs). The paper contributes to the related literature at a conceptual level by showing how three control archetypes, namely market, bureaucratic and clan, in conjunction with two control strategies, namely performance evaluation and trust‐based strategies, could be used by public partners to minimise relational and performance risk, thereby achieving value for money. Practitioners could also use the linkages identified in this paper to develop management control systems for PPPs.     

Equity Markets Do Not Fit All: an Analysis of Public‐to‐Private Deals in Continental Europe

Concentration of family‐based ownership and recent development of private equity companies in Continental Europe suggest that the motivations and results of public‐to‐private (PTP) deals may differ from well‐studied cases in the USA and the UK. We overview the PTP market and measure the cumulative abnormal returns (CARs) of 106 PTP deals concluded in Continental Europe from 2000 to 2005, introducing a model to explain the abnormal returns. Our results partially confirm findings of previous studies, namely, that undervalued and smaller firms register higher CARs. We additionally find that deals promoted by family owners register higher abnormal returns, whereas financial investors and private operating firms show no impact.     

The Changing Nature of Contracting and Trust in Public‐Private Partnerships: The Case of Victorian PPP Prisons

This paper examines shifting constructions of contracting and trust that are manifest between pre‐2000 and post‐2000 public‐private partnerships (PPPs) providing prison facilities and/or services in the Australian State of Victoria. As such, this paper is significant because it outlines longitudinal insights into the nature of changing practices sustaining these PPPs. The post‐2000 period examined reflects a change of government and the policy context. Our examination is based on a range of primary and secondary documents. The primary documents comprise three pre‐2000 Prison Services Agreements and two post‐2000 Facilities Services Agreements. A number of government and other reports constitute the secondary documents consulted. While there are many substantive similarities between the contracts, we find five main areas of changed contracting practices over the period examined. These relate to: first, the objectives of the PPP prisons; second, risk management practices; third, the approach to performance measurement and reporting; fourth, the structuring of incentive and payment mechanisms; and fifth, the emphasis on collaboration. Overall, we find that the post‐2000 contracts promote a more overt development of goodwill trust and relational contracting, building on presumptions of contractual and competence forms of trust. However, quite different outcomes have been achieved from particular contractual contexts. Our study suggests that in complex PPP contracts, the influences of both the transacting parties and the transaction environment have been insufficiently recognized in the literature on PPPs.     

Overcoming Opportunism in Public‐Private Project Finance

The possibility of opportunistic behavior, whether by the private investors who operate public‐private projects or by the government agencies who oversee and administer them, can become a powerful deterrent to raising public‐private project financing, especially considering the scale of the investment in infrastructure. Nevertheless, both parties can protect themselves against the counterparty's possible opportunism by giving the investor an “exit” (or put) option and the public agent a “bail‐out” (or call) option on the private investor's shares. In describing the role and design of such puts and calls, this paper presents a mechanism for converting “natural monopolies” into competitive or contestable markets by using over‐the‐counter option contracts that combine the stability of long‐term contracts and the flexibility of short‐term contracts. In the language of economists, the exit/bail‐out option mechanisms presented here are seen as reducing barriers to entry by streamlining incomplete long‐term contracts and avoiding contractual problems related to “bounded rationality” and opportunism.     

民营银行之花如何绽放?

民营银行在中国早已不是要不要的问题,而是已经存在,如何让其健康发展、扩大其功能作用的问题。     

私营部门如何获得亚行的资金援助

在中国，私营企业正逐步走上历史舞台，并迅速发展起来，成为经济发展的生力军。为了充分发挥其对经济增长的促进作用，为中国脱贫解困开创一条新的途径，亚行专门制定了有关私营部门的援助战略和技术支持。为了便于中国的私营企业获得亚行的资金援助，这里将对亚行的相关援助计划及其具体操作进行介绍，希望能对私营企业有所帮助。     

商业银行向社会投资者转让贷款债权问题初探

商业银行向社会投资者转让贷款债权,是当前形势下商业银行处置不良贷款措施的创新,但对于此种债权转让的合法性,在理论上和实务操作上都存在争议.虽然银监会对此问题的批复可以指引债权转让工作,但在当前法律规定尚不明确的情况下,商业银行仍需注意相关法律风险.     

Liquidity Risk of Private Assets: Evidence from Real Estate Markets

Investment in thinly traded private assets involves liquidity risk. Existing literature provides limited guidance as it mainly focuses on publicly traded security assets such as stocks and bonds. This paper develops an analytical tool for quantifying liquidity risk of private assets. Using commercial real estate as a model asset and under reasonable assumptions, we find that the magnitude of liquidity risk is too large to be ignored, especially in down markets when liquidity risk is a great concern.     

Lock‐In Effects in Relationship Lending: Evidence from DIP Loans

Do prior lending relationships result in pass‐through savings (lower interest rates) for borrowers, or do they lock in higher costs for borrowers? Theoretical models suggest that when borrowers experience greater information asymmetry, higher switching costs, and limited access to capital markets, they become locked into higher costs from their existing lenders. Firms in Chapter 11 seeking debtor‐in‐possession (DIP) financing often fit this profile. We investigate the presence of lock‐in effects using a sample of 348 DIP loans. We account for endogeneity using the instrument variable (IV) approach and the Heckman selection model and find consistent evidence that prior lending relationship is associated with higher interest costs and the effect is more severe for stronger existing relationships. Our study provides direct evidence that prior lending relationships do create a lock‐in effect under certain circumstances, such as DIP financing.     

The Choice of Private Versus Public Capital Markets: Evidence from Privatizations

We examine the impact of political, institutional, and economic factors on the choice between selling a state‐owned enterprise in the public capital market through a share issue privatization (SIP) and selling it in the private capital market in an asset sale. SIPs are more likely in less developed capital markets, for more profitable state‐owned enterprises, and where there are more protections of minority shareholders. Asset sales are more likely when there is less state control of the economy and when the firm is smaller. Our results suggest the importance of privatization activities in developing the equity markets of privatizing countries.     

How Does the Corporate World Cope with Mega‐Terrorism? Puzzling Evidence from Terrorism Insurance Markets

Terrorist attacks that have succeeded abroad since 2001, as well as others that were prevented, indicate that the threat of a large‐scale attack is real and will be with us for a long time. Focusing on the United States, the United Kingdom, and Germany, this article analyzes the role that insurance can play in providing commercial enterprises with financial protection against the economic consequences of major terrorist attacks. The article begins by explaining the design and key features of terrorism insurance programs operating today in each of the three countries (TRIA in the U.S., Pool Re in the U.K., and Extremus in Germany). The authors then provide a detailed comparative analysis of the evolution of prices and take‐up rates (based on as yet unpublished data), with particular attention to financial institutions. For those who think the U.S. is the most likely target for mega‐terrorism, the findings are somewhat puzzling. On average, for example, companies in the U.S. do not pay even half as much for comparable coverage under TRIA as companies pay in Germany under Extremus, which raises the questions: Is terrorism coverage under the U.S. insurance program now drastically underpriced? If so, what would be the likely consequences of another large‐scale attack in the U.S.? On the demand side, the authors observe a dramatic increase in take‐up rates in the U.S. since 2003, revealing increased corporate concern. By contrast, the market penetration in Germany remains remarkably low. A better understanding of these programs and of the recent evolution of terrorism insurance markets in the U.S. and Europe should help corporate and government decision makers develop more effective protection against the economic consequences of mega‐terrorism.     

Understanding the Recent Growth in Consumer Loans and Credit Cards in Emerging Markets: Evidence from Turkey

In recent years, the surge in household indebtedness to historical heights has become a significant concern for developed economies. A similar trend has been witnessed in emerging market countries including Turkey. Our objective is to help further understand the dynamics of the recent growth in consumer loans and credit cards (CLCC) in Turkey. For this purpose, we investigate the long-term equilibrating relationships and short-term deviations from the equilibrium, and explore the determinants, directions, and strengths of causality relationships between CLCC and the selected macroeconomic variables, and analyze the dynamic interactions among the variables in the post-sample period by analyzing how CLCC responds to the shocks given to other macroeconomic variables and the contribution of each variable on the forecast variability of CLCC. We use monthly data for the period of January 2004—December 2013 of seven macroeconomic variables of money supply, interest rate, income, consumer confidence, inflation, stock market, and consumer goods imports. On empirical findings, we make suggestions about which policy tools should be used to influence, and if necessary to manage, the growth in CLCC.     

如何激发民营企业创新--来自实际控制人财富集中度的视角北大核心

在我国实施创新驱动发展战略的背景下,本文从企业重大事项决策者实际控制人的视角,分析其财富集中度对民营上市公司创新的影响。结果显示,实际控制人财富集中度越高,企业创新水平越低。机制检验显示,实际控制人财富集中度会降低企业风险承担。这表明,实际控制人财富集中度越高,其对创新失败风险的容忍度越低,进而不利于企业创新。进一步研究显示,政府补助(机构投资者)可以发挥“风险缓冲”(“监督制衡”)的作用,削弱实际控制人财富集中度对企业创新的负面影响。本文还发现,财富集中的实际控制人更可能进行技术并购,以作为自主创新不足的替代。本文从实际控制人财富集中度的视角对企业创新的相关研究进行深化,并拓展了政府补助、机构投资者、技术并购在企业创新中发挥作用的相关研究;同时从实际控制人财富分散成本和风险、政府风险分担和机构投资者制衡约束等视角为推动民营企业创新的政策制定和公司治理改革提供参考。     

Interest Rates and Stock Prices: Evidence from Central and Eastern European Markets

We provide empirical evidence regarding the responses of Central and Eastern European capital markets to monetary policy via domestic and international short-term interest rate shocks. The analysis is conducted using a four-variable structural vector error correction model identified by means of permanent-transitory restrictions. The results indicate a noticeable effect of the international interest rate on stock market indexes in the cases of the Czech Republic, Hungary, Poland, and Romania. Since no monetary policy autonomy exists in Bulgaria, Latvia, and Lithuania, we find support only for the inverse relationship between foreign interest rate and stock index prices.