Control Rights Incentive Mechanism for PPP Projects Considering Financial Institutions’ Early Intervention

Abstract

The unreasonable distribution of control rights delaying project operating income and the extension of debt repayment periods incur the highest economic losses to financial institutions as the primary fund providers of public–private partnership (PPP) projects. However, these monetary bodies are rarely involved in distributing the control rights of PPP projects, as this would not be conducive to improving the efficiency and promoting the successful implementation of the project. This paper suggests that financial institutions can intervene early in PPP projects, plan the projects reasonably to reduce capital losses, increase project management experience, improve the participants’ resource input level, and positively affect the control rights distribution mechanism of the project. Based on incomplete contract theory, this paper constructs the PPP project consortium’s incentive game model of control rights under the scenario that financial institutions intervene early in the planning stage to improve government and private investors’ income. The results show that the early intervention of financial institutions in PPP projects can reduce private investors’ share of control rights and improve their basic and cooperative efforts, the government’s efforts, and the expected output utility of PPP projects. This paper helps to tackle the current challenge that financial institutions cannot participate in PPP projects in the early stage, enhancing the cooperation efficiency and promoting the sustainable and healthy development of PPP projects.