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Article: Simulating the effect of risks on equity return for concession-based public-private partnership projects

TitleSimulating the effect of risks on equity return for concession-based public-private partnership projects
Authors
KeywordsDebts
Equity capital
Finance
Partnership
Rate of return
Simulation
Issue Date2010
PublisherEmerald Group Publishing Limited. The Journal's web site is located at http://www.emeraldinsight.com/ecam.htm
Citation
Engineering, Construction And Architectural Management, 2010, v. 17 n. 4, p. 352-368 How to Cite?
AbstractPurpose - Unlike other project delivery options, a much larger proportion of risks is borne by the private partner in public-private partnerships, since a large amount of equity is needed to finance the scheme. As a result, it is of paramount importance for the franchisee to analyse the possible project outcomes with due reference to potential risks affecting cash inflow and outflow. The purpose of this paper is to address the shortcomings of deterministic estimations by developing a proposal for a simulation model that aims to unveil the probability distributions of the equity amount and return on equity. Design/methodology/approach - In this paper, a simulation model is developed to establish the probability distributions of these two indicators under the influence of risks. A simple case study is also presented to illustrate the concept and application of this model. Findings - The simulation model can generate the probability distributions related to the net present value of the equity component as well as the rate of return on equity. Practical implications - The method proposed in this paper should help the private investors analyse the amount of equity to be injected to the project and its corresponding return rate. Originality/value - By referring to the probability distribution, an equity investor can establish whether they can recover their investment and gain a desired return rate. Based upon the risk attitude of the investor, decision-makers can then decide whether the scheme should be pursued or not. © Emerald Group Publishing Limited.
Persistent Identifierhttp://hdl.handle.net/10722/137259
ISSN
2015 SCImago Journal Rankings: 0.541
References

 

DC FieldValueLanguage
dc.contributor.authorNg, STen_HK
dc.contributor.authorXie, Jen_HK
dc.contributor.authorKumaraswamy, MMen_HK
dc.date.accessioned2011-08-26T14:21:49Z-
dc.date.available2011-08-26T14:21:49Z-
dc.date.issued2010en_HK
dc.identifier.citationEngineering, Construction And Architectural Management, 2010, v. 17 n. 4, p. 352-368en_HK
dc.identifier.issn0969-9988en_HK
dc.identifier.urihttp://hdl.handle.net/10722/137259-
dc.description.abstractPurpose - Unlike other project delivery options, a much larger proportion of risks is borne by the private partner in public-private partnerships, since a large amount of equity is needed to finance the scheme. As a result, it is of paramount importance for the franchisee to analyse the possible project outcomes with due reference to potential risks affecting cash inflow and outflow. The purpose of this paper is to address the shortcomings of deterministic estimations by developing a proposal for a simulation model that aims to unveil the probability distributions of the equity amount and return on equity. Design/methodology/approach - In this paper, a simulation model is developed to establish the probability distributions of these two indicators under the influence of risks. A simple case study is also presented to illustrate the concept and application of this model. Findings - The simulation model can generate the probability distributions related to the net present value of the equity component as well as the rate of return on equity. Practical implications - The method proposed in this paper should help the private investors analyse the amount of equity to be injected to the project and its corresponding return rate. Originality/value - By referring to the probability distribution, an equity investor can establish whether they can recover their investment and gain a desired return rate. Based upon the risk attitude of the investor, decision-makers can then decide whether the scheme should be pursued or not. © Emerald Group Publishing Limited.en_HK
dc.languageengen_US
dc.publisherEmerald Group Publishing Limited. The Journal's web site is located at http://www.emeraldinsight.com/ecam.htmen_HK
dc.relation.ispartofEngineering, Construction and Architectural Managementen_HK
dc.subjectDebtsen_HK
dc.subjectEquity capitalen_HK
dc.subjectFinanceen_HK
dc.subjectPartnershipen_HK
dc.subjectRate of returnen_HK
dc.subjectSimulationen_HK
dc.titleSimulating the effect of risks on equity return for concession-based public-private partnership projectsen_HK
dc.typeArticleen_HK
dc.identifier.emailNg, ST:tstng@hkucc.hku.hken_HK
dc.identifier.emailKumaraswamy, MM:mohan@hkucc.hku.hken_HK
dc.identifier.authorityNg, ST=rp00158en_HK
dc.identifier.authorityKumaraswamy, MM=rp00126en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1108/09699981011056565en_HK
dc.identifier.scopuseid_2-s2.0-78049521364en_HK
dc.identifier.hkuros191906en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-78049521364&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume17en_HK
dc.identifier.issue4en_HK
dc.identifier.spage352en_HK
dc.identifier.epage368en_HK
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridNg, ST=7403358853en_HK
dc.identifier.scopusauthoridXie, J=18438839800en_HK
dc.identifier.scopusauthoridKumaraswamy, MM=35566270600en_HK
dc.identifier.citeulike7604488-

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