Project financing: Deal or no deal
AbstractMost research on project financing focuses mainly on structuring and financing issues. In this paper we propose a model that incorporates the effects of the management efforts on market outcomes in its framework. Thus, we can examine project financing from the perspective of managerial incentives. The model highlights a set of conditions under which corporations prefer off-balance-sheet project financing. The choice is driven by the required amount of investment and the extent of uncertainty. Companies tend to choose project financing when managers' efforts have a significant impact on the magnitude and likelihood of favorable outcomes. Further, the larger the capital amount, the more likely it is that companies will use outside project financing.
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Bibliographic InfoArticle provided by Elsevier in its journal Review of Financial Economics.
Volume (Year): 19 (2010)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/inca/620170
Project finance Internal corporate finance Managerial incentives Capital investment;
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