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"Risk and Capital Structure in Asian Project Finance"

Paul M. Vaaler, Barclay E. James, and Ruth V. Aguilera

 

First Author :

Paul M. Vaaler
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820
USA

217-333-4504
217-244-7969 (Fax)

pvaaler@uiuc.edu

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Second Author :

Barclay E. James
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820
USA

bejames@uiuc.edu


Third Author :

Ruth V. Aguilera
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
350 Wohlers Hall, MC 706
Champaign, IL 61820
USA

ruth-agu@uiuc.edu

http://www.business.uiuc.edu/faculty/aguilera.html

 
 
Abstract :
 
We develop and test a multi-level theoretical framework for understanding country-, industry-, syndicate-, firm- and project-specific factors shaping the capital structure and broader risk profile of a quintessentially Asian form of foreign direct investment (FDI) called project finance. Empirical analyses of 238 projects announced for 13 Asian countries from 1995-2004 support hypotheses derived from our framework, and suggest that country-level institutional factors such as a Common Law legal system, syndicate-level factors such as the concentration of equity among syndicate sponsors, and project-level factors such as the US dollar cost of the project all substantially affect project capital structure and risk.
 
 
Keywords :
 
foreign direct investment, governance, institutions, project finance, risk
 
 
Footnotes & Acknowledgements :
 
Please contact Paul M. Vaaler regarding this paper. We thank Randy Westgren and the UIUC Center for International Business and Education and Research (CIBER) for providing financial support to make this research possible. We also appreciate the comments that we received from Mike Peng, Arie Lewin and other participants last November 2006 at the Fourth Annual AIB/JIBS Conference on Emerging Research Frontiers in International Business. All remaining errors are ours.
 
 
Manuscript Received : 2006
Manuscript Published : December 22, 2006
 
 
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