 HOW DO CREDIT SPREADS AFFECT RISK ALLOCATION IN PUBLIC � PRIVATE PARTNERSHIPS?Carlos Contreras () and
Julio Angulo ()
Journal of Public Administration, Finance and Law, 2016, vol. 9, issue 9, 63-79 Abstract: The impact of funding cost is an important dimension in the design of risk allocation in public�private partnerships (PPP), given the relevant leverage of project financing. However, the academic literature has paid little attention to this issue. The aim of this paper is to measure to what extent a higher cost of funding affect the choice of risk transfer by grantor governments. During the Great Recession, developing PPPs with market risk was a difficult task and high credit spreads were applied to project finance loans. This paper analyzes the optimal risk allocation in a PPP by using two models in which the government has the option to transfer availability risk or demand risk to a private partner. The paper finds that the credit spreads of project finance loans significantly affect the decisions on which type of risk should be transferred to private-sector parties when governments use PPPs. Keywords: Availability risk; Demand risk; Risk allocation; Credit spread; Project finance; Public�private partnership (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aic:jopafl:y:2016:v:9:p:63-79 Access Statistics for this article More articles in Journal of Public Administration, Finance and Law from Alexandru Ioan Cuza University, Faculty of Economics and Business Administration Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.