Owusu-Manu, D G; Edwards, D J; Kukah, A S; Parn, E A; El-Gohary, H and Hosseini, M R (2018) An empirical examination of moral hazards and adverse selection on PPP projects: A case study of Ghana. Journal of Engineering, Design and Technology, 16(6), pp. 910-924. ISSN 1726-0531
Abstract
Purpose: Failures of public–private partnership (PPP) projects are often ascribed to the agency problem, which arise under conditions of inadequate and asymmetric information when a principal (the client) hires an agent (the contractor). This paper aims to identify the causes and effects of moral hazard and adverse selection on PPP construction projects using a synthesis of extant literature (to determine key variables) and analysis of survey questionnaire data collected. Design/methodology/approach: Mean score ranking was used to rank the causes and effects of moral hazard and adverse selection problems in PPP construction projects. One sample t-test was conducted to establish the relative significance of these variables. Findings: Effort dimensions (which are not verifiable), low transfer of risk, lack of accurate information about project conditions, wrong party chosen to execute project and renegotiation of contracts were the most significant causes of moral hazard and adverse selection problems in PPP construction projects. In addition, reduction of competition, high transaction costs, consequences on profitability of project, siphoning of funds and negative implications on enforceability of contract were the most significant effects of moral hazard and adverse selection problems in PPP construction projects. Practical implications: Application of these findings will help mitigating moral hazard and adverse selection problems occurring when undertaking PPP construction projects. Originality/value: Research findings provide guidance to construction stakeholders in the PPP sector on the different causes and effects of adverse selection and moral hazard. This pioneering study is the first to conduct an empirical assessment of the causes and effects of moral hazard and adverse selection of PPP construction projects in a developing country.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | adverse selection; causes and effects; construction projects; Ghana; moral hazard; public–private partnership |
| Index terms: | case study, partnership, Ghana, profitability, adverse selection, dimension, developing country, transaction cost, moral hazard, survey, methodology, construction project, competition, questionnaire, agent, agency |
| Subjects: | sociology, market analysis, partnership management, financial analysis, research methods, financial risk, development economics, Geography, production management, health monitoring assessment and metrics, economic analysis, data collection methods, practitioner |
| Topics: | Stakeholder Management, Roles and Professions, Health and Safety, Cost Management, Business Strategy, Geographical Context, Project Management, Research Practice, International Construction |
| Descriptive scope: | 5 PCTEA |
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