Manamgoda, M G N; Perera, B A K S and Perera, C S R (2018) Impact of interest rates of bank loans on road construction: The case of Sri Lanka. Journal of Engineering, Design and Technology, 16(4), pp. 518-532. ISSN 1726-0531
Abstract
Purpose: Infrastructure systems play a dominant role in the economic growth of countries. Projects involved with the construction of roads, which is vital for the development of a country, are financed mainly using borrowed funds because of the reliability of debt financing. The cost of borrowing is the interest that has to be paid. In Sri Lanka, there is a high tendency for interest rates of bank loans to fluctuate, and this makes the road projects in the country that are funded with borrowed money to be highly risky. Thus, this paper aims to identify the impact of bank loan interest rates on road construction in Sri Lanka. Design/methodology/approach: The study consisted of two questionnaire surveys conducted among financial specialists and road construction experts, followed by a documentary review. The collected data were analysed using Relative Importance Index. The relationship between the interest rates of bank loans and the prices of the resources used in road projects were determined using regression and correlation analyses. Findings: The research revealed a strong, linear relationship between interest rate fluctuations and bitumen, aggregate base course, metal and earth price fluctuations. It also identified the pattern of interest rate fluctuations to help practitioners to predict the pattern of input price variations. Originality/value: When developing the capital structure of road projects, it is necessary to consider the prices of materials used in the projects when determining the financial risks of debt financing.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bank loan; correlation and regression analysis; fluctuation; interest rate; road construction |
| Index terms: | correlation analysis, aggregate, capital structure, road project, metal, regression analysis, economic growth, Sri Lanka, road construction, bitumen, debt financing, survey, relative importance index, practitioner, questionnaire, variation, methodology, interest rate |
| Subjects: | data collection methods, risk assessment, practitioner, materials science, building materials, economic analysis, research methods, traditional and composite building materials, civil engineering, economic development, infrastructure engineering, financial risk, Geography, contractual condition, statistical analysis |
| Topics: | Contract Administration, Cost Management, Business Strategy, Construction Materials, Engineering Principles, Geographical Context, Research Practice, Roles and Professions, Risk Management, Sustainability |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here