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Does government support affect private partners’ profitability in public–private partnerships? Evidence from China

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  • Han Xu

    (Shahe Higher Education Park)

Abstract

Infrastructures based on the idea of public–private partnership (PPP) contributes to promoting infrastructure investments, improving public services, and satisfying social demands worldwide over the last thirty years. Public sector support is a crucial factor in attracting the private sector. However, little is known about the effect of public sector support on investors’ profitability. Utilizing a conceptual framework and empirical analysis, in this paper, we explore the dual impact of government support on PPP firm profitability. Our model shows that while compliant government support can theoretically enhance a PPP firm’s profitability, some supportive behavior may harm the firm’s profitability. Employing unique comprehensive project-level and firm-level data on 555 Chinese A-share listed companies from 2010 to 2019 and new variables to measure government support, we find that while inclusion in the national PPP platform can enhance firm profitability by 8.2%, increased shareholding reduces firm profitability significantly by −23.3%. Our results imply that the government should reasonably support the private sector in PPP projects. Our study extends the literature on the role of government support in PPP projects.

Suggested Citation

  • Han Xu, 2023. "Does government support affect private partners’ profitability in public–private partnerships? Evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    • Handle: RePEc:pal:palcom:v:10:y:2023:i:1:d:10.1057_s41599-023-01723-w
    DOI: 10.1057/s41599-023-01723-w
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