Optimal Capital Structure of PPP Projects: A Review of the Literature

  • Xiang Hu School of Management, University Sains Malaysia, Malaysia.
  • Chee-Wooi Hooy School of Management, University Sains Malaysia, Malaysia.
Keywords: Public-private-partnership, Optimal capital structure, Measurement method, Literature review, Future research


Public-private-partnership mode helps to better solve the problems in financing, technology, and management of public goods by effectively utilizing the respective advantages of government and private sector. There are myriad researches on risk-sharing, benefit distribution, asset securitization, and capital structure of PPP projects these days. In this paper, we provide analysis and discussion for the research methods of selected literature which applied the most used method for measuring the optimal capital structure of public-private-partnership projects. By analyzing these studies, we can identify the potential problems of present research methods, and we can also provide research suggestions for future researchers to promote and enhance their research methods of optimal capital structure of public-private-partnership projects and make the methods more practicable and reality-adaptive.


Download data is not yet available.


Akintoye, A., Hardcastle, C., Beck, M., Chinyio, E., & Asenova, D. (2003). Achieving best value in private finance initiative project procurement. Construction Management and Economics, 21(5), 461-470.

Bakatjan. S., Arikan, M., & Tiong, R.L.K. (2003). Optimal capital structure model for BOT power projects in Turkey. Journal of Construction Engineering and Management, 129(Compendex), 89-97.

Baumol, W.J., Panzar, J.C., & Willig, R.D. (1982). Contestable markets and the theory of industry structure. New York: Harcourt Brace Jovanovich.

Chang, L.M., & Chen,P.H. (2001). BOT financial model: Taiwan high speed rail, case. Journal of Construction Engineering and Management, 127(3), 214-222.

Chiara, N., Garvin, M., & Vecer, J. (2007). Valuing simple multiple-exercise real options in infrastructure projects. ASCE Journal of Infrastructure Systems, 13(2), 97–104.

Dias, A., Jr., & Ioannou, P.G. (1995). Debt capacity and optima capital structure for privately financed infrastructure projects. Journal of Construction Engineering and Management, 121(4), 404–414.

Du, J., Wu, H.Y., & Jin. R.Y. (2019). Capital structure of public–private partnership projects: A sustainability perspective. Sustainability, 11(13), 3505.

Fama, E.F., & French. K.R. (2006). The value premium and the CAPM. Journal of Finance, 61(5), 2163-2185.
Farajian, M., & Cui, Q.B. (2011). A multi-objective decision support system for PPP funding decisions. Computing in Civil Engineering, 413, 760–767.

Feng, K., Wang, S.Q., & Xue, Y.G. (2017). Optimization of PPP project equity Structures based on the satisfactions of the main stakeholders. Journal of Tsinghua University (Science and Technology), 57(4), 376-381.

Frank, M.Z., & Goyal, V.K. (2011). Trade-off and pecking order theories of debt. Handbook of Empirical Corporate Finance: Empirical Corporate Finance. Elsevier.

Grossman S.J., & Hart, O.D. (1983). An analysis of principal-agent problem. Econometrica, 51(1), 7-46.
Hodder, J.E., & Riggs, H.E. (1985). Pitfalls in evaluating risky projects. Harvard Business Review, 63(1), 128-135.

Holmstrom, B. (1979). Moral Hazard and Observability. Bell Journal of Economics, 1979, 10(1), 74-91.
Jensen, M.C., & Meckling, W.H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 303-360.

Kraus, A., & Litzenberger, R.H. (1973). A state-preference model of optimal financial leverage. Journal of Finance, 28(4), 911–922.

Liu, Y.G., & Jiang, N.Y. (2006). A review of principal-agent theory. Academia, 116(1), 69-78.
Modigliani, F.F., & Miller, M.H. (1958). The cost of capital, corporation finance, and the theory of investment. American Economic Review, 48(3), 261-297.

Modigliani, F.F., & Miller, M.H. (1963). Corporation income taxes and the cost of capital: A correction. American Economic Review, 53(3), 433-443.

Oakland, W.H. (1987). Theory of public goods. In Handbook of public economics,2, 485-535.
Ross S. (1973). The economic theory of agency: The principals problem. American Economic Review, 63, 134-139.

Samuelson, P.A. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36, 387-389.

Songer, A.D., Diekmann, J., & Pecsok, R.S. (1997). Risk analysis for revenue dependent infrastructure. Journal of Construction Management and Economics, 15(4), 377–382.

Sun, H., & Li, L. (2016). Pricing public-private-partnerships projects from a game theory perspective. Journal of WUT (Information and Management Engineering, 38(1), 52-56.

United Nations Development Programme. (1998). Promote the development of infrastructure through partnership between the public sector and the private sector (PPP). United Nations.

Wang, H.M., Liu, Y.H., Xiong, W., & Song, J.B. (2019). The moderating role of governance environment on the relationship between risk allocation and private investment in PPP markets: Evidence from developing countries. International Journal of Project Management, 37(1), 117-130.

Wibowo. A. (2005). Discussion of “optimal capital structure model for BOT power projects in Turkey” by Sandalkhan Bakatjan, Metin Arikan, & Robert L.K. Tiong. Journal of Construction Engineering and Management, 131(3), 385-387.

World Bank. (2012). Public-private-partnerships reference guide, Version 1.0. Washington DC: World Bank.

World Bank. (2011). government support to public private partnerships: Highlights. Washington D.C.: Word Bank.
Ye, S.D., & Tiong, R.L.K. (2000). NPV-at-risk method in infrastructure project investment evaluation. Journal of Construction Engineering and Management, 126(3), 227-233.

Yun. S.M., Han, S.H., Kim H.K., & Ock, J.H. (2009). Capital structure optimization for build-operate-transfer projects using a stochastic and multi-objective approach. Canadian Journal of Civil Engineering, 36(5), 777-790.

Zhang, X.Q. (2004a). Concessionaire selection: Method and criteria. Journal of Construction Engineering and Management, 130(2), 235-244.

Zhang, X.Q. (2004b). Improving concessionaire selection protocols in public / private partnered infrastructure Projects. Journal of Construction Engineering and Management, 130(5), 670-679.

Zhang, X.Q. (2005). Criteria for selecting the private-sector partner in public-private partnerships. Journal of Construction Engineering and Management, 131(5), 631-644.

Zhang, X.Q. (2006). Public clients' best value perspectives of public private partnerships in infrastructure development. Journal of Construction Engineering and Management, 132(2), 107-114.

Zhao, S.Q. (2017). Optimal financing scheme for highway public-private partnerships projects: Decision making and application. Friends of Accounting, 7, 47-51.
How to Cite
Hu, X., & Hooy, C.-W. (2022). Optimal Capital Structure of PPP Projects: A Review of the Literature. Journal of Contemporary Issues and Thought, 12(2), 1-8. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/6966