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Project Finance as a Risk-Management Tool in International Syndicated LendingChrista HainzCESifo (Center for Economic Studies and Ifo Institute for Economic Research) - Ifo Institute for Economic Research Stefanie KleimeierMaastricht University - Limburg Institute of Financial Economics (LIFE) December 2006 Governance and the Efficiency of Economic Systems (GESY), SFB/TR 15, Discussion Paper No 183 Abstract: 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".
Number of Pages in PDF File: 48 Keywords: Project finance, syndicated loans, political risk, double moral hazard JEL Classification: D82, F34, G21, G32 working papers seriesDate posted: August 3, 2004Suggested CitationContact Information
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