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Institutional quality, investment efficiency, and the choice of public–private partnerships

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  • Nhung Hong Dao
  • Vijaya Bhaskar Marisetty
  • Jing Shi
  • Monica Tan

Abstract

We examine a sample of 625 public–private partnership (PPP) firms from 1980 to 2015 that straddle nine countries with varying degrees of economic development and PPP markets. We find that the motivations of the firms that undertake PPP investments vary. While private sector firms in economies with low institutional quality choose to engage in PPPs to alleviate capital constraints attributed to underinvestment, those in economies with high institutional quality participate in PPPs to solve the problem of overinvestment due to an abundant cash flow. In the long run, the benefits of lower capital constraints through PPP investments are more pronounced in economies with high institutional quality.

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  • Nhung Hong Dao & Vijaya Bhaskar Marisetty & Jing Shi & Monica Tan, 2020. "Institutional quality, investment efficiency, and the choice of public–private partnerships," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1801-1834, June.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:2:p:1801-1834
    DOI: 10.1111/acfi.12514
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