Risk Management with Leverage: Evidence from Project Finance

Byoun, Soku; Kim, Jaemin; Yoo, Sean Sehyun

doi:10.1017/s0022109013000082

Cited by 38 publications

(18 citation statements)

References 53 publications

(48 reference statements)

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“…For example, in 2014, more than a quarter of investments in the Americas were directed towards high risk countries in South America (Project Finance International 2016). The most comprehensive sources of PF information are the databases maintained by Dealogic and Thomson Reuters (Byoun et al 2013;Corielli et al 2010;Lerner et al 2008). Within their sample of investments, the average Economist Intelligence Unit political risk score of host-countries (33) was comparable to South Africa.…”

Section: History and Market For Project Financementioning

confidence: 99%

“…Along with the rising popularity of financial contracting theory, the majority of later Finance research extended its focus from capital structure-related benefits to contractual risk management (Byoun et al 2013;Byoun and Xu 2014;Corielli et al 2010). Research highlighted the pivotal role of contractual agreements between parties in PF.…”

Section: Financial Researchmentioning

confidence: 99%

“…Financial research should equally extend its conceptualization of agency to include partner macrocharacteristics, in order to explain variations in project structures (i.e. local institutions, norms and culture) (Byoun et al 2013). IB research, on the other hand, should make full use of the rich setting of PF to advance our understanding of agency costs between individual participants, groups of participants and between local and foreign project stakeholders.…”

Section: Interdisciplinary Perspectivesmentioning

confidence: 99%

“…Non-recourse loans involve extensive control rights for debt providers. When predetermined performance indicators are not met, the loan covenants stipulate that the lending syndicate takes over control of the project (Byoun et al 2013;Subramanian and Tung 2016). In sum, PF contradicts transaction cost logics.…”

Section: Management and Ib Theorymentioning

confidence: 99%

“…The institutional literature in IB focuses on such institutional impediments and works under the assumption that institutional context and differences affect strategic decisions of firms investing in foreign countries (Kostova 1999;Kostova et al 2008Kostova et al , 2009Kostova and Zaheer 1999;North 1981;Scott 1995). Clearly, in PF such local risks of a particular investment effect the decision to use PF as a means of reducing institutional risks (Byoun et al 2013;Scott et al 2011). However, the mechanisms proposed in PF differ from those most prominently propagated by institutional IB scholars.…”

Section: Management and Ib Theorymentioning

confidence: 99%

See 4 more Smart Citations

International project finance: review and implications for international finance and international business

Müllner

2017

Manag Rev Q

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This literature review analyzes the global phenomenon of international project finance (PF) as both a management and finance instrument, allowing practitioners to realize large scale infrastructure projects in high risk contexts. After describing the characteristics of PF, its historical origins and its unique benefits for empirical inquiry, I summarize the findings of academic research from an interdisciplinary perspective. Based on this integration of Finance, Management and International Business research, I discuss the theoretical implications for each field that emanate from PF. Finally, I identify possibilities for future research and propose a more balanced, interdisciplinary academic treatment of PF.Keywords Project finance · Megaprojects · Capital structure · Foreign direct investment · Risk management · Literature review JEL Classsification F210 · F230 · G320 · M160 · G390

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Section: History and Market For Project Financementioning

confidence: 99%

Section: Financial Researchmentioning

confidence: 99%

Section: Interdisciplinary Perspectivesmentioning

confidence: 99%

Section: Management and Ib Theorymentioning

confidence: 99%

Section: Management and Ib Theorymentioning

confidence: 99%

See 3 more Smart Citations

International project finance: review and implications for international finance and international business

Müllner

2017

Manag Rev Q

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Challenging the payment effect in bank-financed takeovers

Fischer

2015

J Manag Control

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In the context of bank-financed takeovers, I examine the influence of loans and their characteristics on the success of acquisitions. The unique setting of matched syndicated loans allows me to forego the regular assumption in academic literature of cash payment being equal to debt financing. Consequently, I am able to distinguish between the payment effect and the financing effect of an acquisition. My three main findings are: (i) Payment method is just an estimator of the debt proportion in takeovers. Although percentage of cash has significant explanatory power to account for the sources of financing, variation still remains. (ii) Controlling for the real financial structure renders the payment method insignificant. Hence, the well-known outperformance of cash payment around the announcement of a takeover might actually just be an outperformance of debt-financed takeovers. (iii) Bank-financed acquisitions are associated, on average, with positive abnormal returns for acquirers' stockholders. Higher bank involvements-approximated by greater deal leverage, higher loan costs, longer maturity, lower interest coverage, or no previous banking relationship-are signals for a more successful takeover.

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Energy project financing in the GCC region: an empirical investigation

Atalla

D’Errico

2019

Energy Transit

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This paper analyzes the capital structure of energy infrastructure projects in the Gulf Cooperation Council region, where energy projects form the bulk of the deal-making backload. The econometric estimation of 108 energy project finance for the period 2005-2014 valued at 258 bn USD sheds the light on the success factors for such projects in the region, confirming the relevant relationships among project size, owner concentration and debt duration. The analysis illustrates the roles that debt, equity, interest rate, and the economic crisis play in the financial structuring of infrastructure projects in rapidly growing emerging markets. First, it confirms that longer debt duration is correlated with higher debt ratio. Second, it shows that larger project size is correlated with lower debt ownership concentration. Third, the financial crisis had a different effect on debt ratio and debt duration. Fourth, project size and interest rate are negatively correlated, although regional specific patterns would emerge when comparing the effects of the 2008 financial crisis on interest rates. These findings have several multilevel implications for regulators, debt issuers and investors. For regulators, findings amplify the way in which to improve debt issuance in GCC countries. For issuers, findings suggest that they should be more concerned about the bonds' security and seniority as the firm-specific characteristics, such as size and debt and equity concentration of finance project, affect the capital structure. For investors, the study offers an analytical framework to investigate bonds' structure before investing.

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Risk Management with Leverage: Evidence from Project Finance

Cited by 38 publications

References 53 publications

International project finance: review and implications for international finance and international business

International project finance: review and implications for international finance and international business

Challenging the payment effect in bank-financed takeovers

Energy project financing in the GCC region: an empirical investigation

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