IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v48y2017icp132-140.html
   My bibliography  Save this article

Efficient risk transfer in PPP wastewater treatment projects

Author

Listed:
  • Shrestha, Asheem
  • Chan, Toong-Khuan
  • Aibinu, Ajibade A.
  • Chen, Chuan

Abstract

Risk transfer in public private partnerships (PPPs) may not always be conducive to efficient management due to principal agent problems. This paper identifies three parameters: (i) competition, (ii) monitoring and (iii) incentives, for transferring risks in a principal agent relationship. These parameters are applied to three PPP wastewater projects. The findings illustrate that competition determines the private sectors’ ability to bear risks, monitoring reduces ex-post information asymmetry and incentive ensures that risks are efficiently managed. The lessons learnt from the case studies can provide guidance for governments in transferring risks efficiently in PPP wastewater treatment projects.

Suggested Citation

  • Shrestha, Asheem & Chan, Toong-Khuan & Aibinu, Ajibade A. & Chen, Chuan, 2017. "Efficient risk transfer in PPP wastewater treatment projects," Utilities Policy, Elsevier, vol. 48(C), pages 132-140.
    • Handle: RePEc:eee:juipol:v:48:y:2017:i:c:p:132-140
    DOI: 10.1016/j.jup.2017.03.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178716301023
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2017.03.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Xiao-Hua Jin & Hemanta Doloi, 2008. "Interpreting risk allocation mechanism in public-private partnership projects: an empirical study in a transaction cost economics perspective," Construction Management and Economics, Taylor & Francis Journals, vol. 26(7), pages 707-721.
    2. Roland Strausz, 1997. "Delegation of Monitoring in a Principal-Agent Relationship," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 337-357.
    3. Picard, Pierre, 1987. "On the design of incentive schemes under moral hazard and adverse selection," Journal of Public Economics, Elsevier, vol. 33(3), pages 305-331, August.
    4. Gordon, Cameron & Mulley, Corinne & Stevens, Nick & Daniels, Rhonda, 2013. "Public–private contracting and incentives for public transport: Can anything be learned from the Sydney Metro experience?," Transport Policy, Elsevier, vol. 27(C), pages 73-84.
    5. John Quiggin, 2005. "Public-Private Partnerships: Options for Improved Risk Allocation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(4), pages 445-450, December.
    6. N. Carbonara & N. Costantino & L. Gunnigan & R. Pellegrino, 2015. "Risk Management in Motorway PPP Projects: Empirical-based Guidelines," Transport Reviews, Taylor & Francis Journals, vol. 35(2), pages 162-182, March.
    7. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    8. Asheem Shrestha & Igor Martek, 2015. "Principal Agent Problems Evident in Chinese PPP Infrastructure Projects," Springer Books, in: Liyin Shen & Kunhui Ye & Chao Mao (ed.), Proceedings of the 19th International Symposium on Advancement of Construction Management and Real Estate, edition 127, chapter 0, pages 759-770, Springer.
    9. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    10. André De Palma & Luc E. Leruth & Guillaume Prunier, 2012. "Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 57-73.
    11. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 421-442, March.
    12. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    13. F CvN FOURIE & P BURGER, 2000. "An Economic Analysis and Assessment of Public ‐ Private Partnerships (PPPs)," South African Journal of Economics, Economic Society of South Africa, vol. 68(4), pages 305-316, December.
    14. Chambouleyron, Andrés, 2014. "Mitigating expropriation risk through vertical separation of public utilities: The case of Argentina," Utilities Policy, Elsevier, vol. 30(C), pages 41-52.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marzouk, Mohamed & Ali, Mohamed, 2018. "Mitigating risks in wastewater treatment plant PPPs using minimum revenue guarantee and real options," Utilities Policy, Elsevier, vol. 53(C), pages 121-133.
    2. Asheem Shrestha & Jolanta Tamošaitienė & Igor Martek & M Reza Hosseini & David J Edwards, 2019. "A Principal-Agent Theory Perspective on PPP Risk Allocation," Sustainability, MDPI, vol. 11(22), pages 1-18, November.
    3. Nur, Suardi & Burton, Bruce & Bergmann, Ariel, 2023. "Evidence on optimal risk allocation models for Indonesian geothermal projects under PPP contracts," Utilities Policy, Elsevier, vol. 81(C).
    4. Meishu Wang & Hui Gong, 2018. "Imbalanced Development and Economic Burden for Urban and Rural Wastewater Treatment in China—Discharge Limit Legislation," Sustainability, MDPI, vol. 10(8), pages 1-12, July.
    5. Jokar, Ebrahim & Aminnejad, Babak & Lork, Alireza, 2021. "Assessing and Prioritizing Risks in Public-Private Partnership (PPP) Projects Using the Integration of Fuzzy Multi-Criteria Decision-Making Methods," Operations Research Perspectives, Elsevier, vol. 8(C).
    6. Surachman, Eko Nur & Perwitasari, Sevi Wening & Suhendra, Maman, 2022. "Stakeholder management mapping to improve public-private partnership success in emerging country water projects: Indonesia’s experience," Utilities Policy, Elsevier, vol. 78(C).
    7. Jiangfan Liu & Xiongzhi Xue, 2018. "River Management for Local Governments in China: From Public to Private," IJERPH, MDPI, vol. 15(10), pages 1-11, October.
    8. Bao, Fengyu & Martek, Igor & Chan, Albert P.C. & Chen, Chuan & Yang, Yang & Yu, Heng, 2023. "Assessing the public-private partnership handover: Experience from China's water sector," Utilities Policy, Elsevier, vol. 80(C).
    9. Nizkorodov, Evgenia, 2021. "Evaluating risk allocation and project impacts of sustainability-oriented water public–private partnerships in Southern California: A comparative case analysis," World Development, Elsevier, vol. 140(C).
    10. Xiangdong Liu & Guangxi Cao, 2021. "The Impact of Participation in PPP Projects on Total Factor Productivity of Listed Companies in China," Sustainability, MDPI, vol. 13(14), pages 1-20, July.
    11. Mohammad Heydari & Kin Keung Lai & Victor Shi & Feng Xiao, 2023. "Public Health Risk Evaluation through Mathematical Optimization in the Process of PPPs," IJERPH, MDPI, vol. 20(2), pages 1-19, January.
    12. Xinshuo Hou, 2022. "Can Public–Private Partnership Wastewater Treatment Projects Help Reduce Urban Sewage Disposal? Empirical Evidence from 267 Cities in China," IJERPH, MDPI, vol. 19(12), pages 1-24, June.
    13. Wang, Huanming & Ma, Liang, 2019. "Ownership, corruption, and revenue regimes for infrastructure partnerships: Evidence from China," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ratto Marisa & Schnedler Wendelin, 2008. "Too Few Cooks Spoil the Broth: Division of Labor and Directed Production," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-19, August.
    2. repec:awi:wpaper:0421 is not listed on IDEAS
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    4. Sprinkle, Geoffrey B., 2003. "Perspectives on experimental research in managerial accounting," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 287-318.
    5. Garen, John, 1998. "Self-employment, pay systems, and the theory of the firm: An empirical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 257-274, August.
    6. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133, Elsevier.
    7. Aristotelis Boukouras, 2015. "Separation of Ownership and Control: Delegation as a Commitment Device," Discussion Papers in Economics 15/02, Division of Economics, School of Business, University of Leicester.
    8. Marisa Ratto & Wendelin Schnedler, 2005. "Division of Labour and Directed Production," The Centre for Market and Public Organisation 05/126, The Centre for Market and Public Organisation, University of Bristol, UK.
    9. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    10. Li, Ke, 2007. "Transaction cost, corporate governance and division of labor--A general equilibrium analysis of professional managers and its implication to China's practice," Research in International Business and Finance, Elsevier, vol. 21(3), pages 447-468, September.
    11. Grosfeld, Irena, 1990. "Reform Economics and Western Economic Theory: Unexploited Opportunities," Economic Change and Restructuring, Springer, vol. 23(1), pages 1-19.
    12. Peter-J. Jost, 2023. "Auditing versus monitoring and the role of commitment," Review of Accounting Studies, Springer, vol. 28(2), pages 463-496, June.
    13. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    14. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    15. Elisabetta Iossa & David Martimort, 2012. "Risk allocation and the costs and benefits of public--private partnerships," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 442-474, September.
    16. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    17. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    18. Fiet, James O., 2001. "The theoretical side of teaching entrepreneurship," Journal of Business Venturing, Elsevier, vol. 16(1), pages 1-24, January.
    19. Lehn, Kenneth, 2021. "Corporate governance and corporate agility," Journal of Corporate Finance, Elsevier, vol. 66(C).
    20. Eitan Goldman & Gary Gorton, 2000. "The Visible Hand, the Invisible Hand and Efficiency," NBER Working Papers 7587, National Bureau of Economic Research, Inc.
    21. Brice Corgnet & Roberto Hernán-González, 2019. "Revisiting the Trade-off Between Risk and Incentives: The Shocking Effect of Random Shocks?," Management Science, INFORMS, vol. 65(3), pages 1096-1114, March.
    22. Kerstin Puschke, "undated". "Optimal Hierarchies with Diverse Decision-Makers," Papers 034, Departmental Working Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:48:y:2017:i:c:p:132-140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.