Determinants of Public–Private Partnerships in Infrastructure in Asia: Implications for Capital Market Development

29 Pages Posted: 22 Feb 2019

See all articles by Suk Hyun

Suk Hyun

Independent

Donghyun Park

Asian Development Bank - Economic Research

Grace Tian

Asian Development Bank

Date Written: August 7, 2018

Abstract

In this study, we attempt to understand the role of greater access to finance, i.e., stocks, bonds and bank loans, in public–private partnership (PPP) investment in developing countries. Most developing countries still depend heavily on fiscal financing for infrastructure projects. Our empirical results reconfirm the fact that banks remain the major source of finance for infrastructure projects. The domestic bond market should be further developed to have depth and liquidity enough to provide longterm funding for private sector investors. Interestingly, we find a negative impact of bond market development on PPP investment. A possible interpretation is that financing through government bonds, which dominates bond markets in developing countries, discourages private sector participation by reducing financing access to the corporate bond market. Our evidence underlines the importance of a well-functioning corporate bond market in developing countries, which can offer long-term financing to private sector participation in infrastructure investments.

Keywords: bond market development, government bond, public–private partnership

JEL Classification: E20, G10, H00

Suggested Citation

Hyun, Suk and Park, Donghyun and Tian, Shu, Determinants of Public–Private Partnerships in Infrastructure in Asia: Implications for Capital Market Development (August 7, 2018). Asian Development Bank Economics Working Paper Series No. 552 (August, 2018). Available at SSRN: https://ssrn.com/abstract=3339107 or http://dx.doi.org/10.2139/ssrn.3339107

Suk Hyun

Independent ( email )

No Address Available

Donghyun Park (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Shu Tian

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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