Hou, W and Wang, L (2022) Research on the refinancing capital structure of highway PPP projects based on dynamic capital demand. Engineering, Construction and Architectural Management, 29(5), pp. 2047-2072. ISSN 0969-9988
Abstract
Purpose: With the majority of highway projects in China having entered their operational phases, the maintenance and repair of the pavement is receiving increasing attention. One problem that needs to be addressed urgently is that of how to raise the proper funds for highway maintenance to ensure the sustainable operation of the project. To this end, the aim of this study is to investigate the capital demand for operation and maintenance of a project by means of a refinancing scheme, in order to reduce the possibility of project bankruptcy and to enhance the economic value of the project. Design/methodology/approach: Based on an analysis of the dynamic complexity of the highway pavement maintenance system, a Markov model is used to predict pavement performance, and an optimal capital structure decision model is proposed for highway public–private partnership (PPP) project refinancing, using the method of system dynamics (SD). The proposed model is then applied to a real case study. Findings: Results show that the proposed model can be used to predict accurately the dynamic changes in the demand for road maintenance funds and refinancing during the period of operation, before making the optimal decision for the refinancing capital structure. Originality/value: Although many scholars have studied the optimal refinancing capital structure of PPP projects, the dynamic changes inherent in the demand for maintenance funds for highway PPP projects are seldom considered. Therefore, in the approach used here the influence of the dynamic change of road maintenance capital demand on refinancing is investigated, and SD is used for the optimal capital structure decision-making model of highway PPP project refinancing, to make the decision-making process more reasonable and scientific.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | highway pavement performance; highway PPP project; markov model; refinancing capital structure; system dynamics |
| Index terms: | system dynamics, methodology, decision-making, complexity, repair, China, operation and maintenance, highway construction, capital structure, bankruptcy, case study, partnership, decision-making process |
| Subjects: | computing systems, data collection methods, economic analysis, Geography, civil engineering, maintenance engineering, research methods, systems engineering, partnership management, decision analysis |
| Topics: | Digital Applications, Stakeholder Management, Risk Management, Geographical Context, Research Practice, Engineering Principles, Business Strategy |
| Descriptive scope: | 4 PCTE |
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