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Project Finance as a Risk-Management Tool in International Syndicated Lending Author info | Abstract | Publisher info | Download info | Related research | Statistics Christa Hainz (Department of Economics, University of Munich, Akademiestr. 1/III, 80799 Munich. christa.hainz@lrz.uni-muenchen.de)
Stefanie Kleimeier (Limburg Institute of Financial Economics, FdEWB, Maastricht University, P.O. Box 616, 6200 MD Maastricht, Netherlands. s.kleimeier@finance.unimaas.nl)
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We develop a double moral hazard model that predicts that the use of project finance increases with both the political risk of the country in which the project is located and the influence of the lender over this political risk exposure. In contrast, the use of project finance should decrease as the economic health and corporate governance provisions of the borrower’s home country improve. When we test these predictions with a global sample of syndicated loans to borrowers in 139 countries, we find overall support for our model and provide evidence that multilateral development banks act as “political umbrellas”.
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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
183.
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Date of creation: Dec 2006Date of revision:
Handle: RePEc:trf:wpaper:183Contact details of provider: Postal: D-68131 Mannheim Fax: +49 621 181-2785 Email: Web page: http://www.sfbtr15.de/ More information through EDIRC
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Keywords: project finance syndicated loans political risk double moral hazard Other versions of this item:
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information F34 - International Economics - - International Finance - - - International Lending and Debt Problems G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
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