Study On PPP Project Governance Mechanism Based On Property Rights Structure And Government Regulation

PPP is an important model that the public sectors and private sectors collaborateto supply the public goods or service. PPP is widely applied in recent years for it helpsease public sectors’ lack of funds and give full play to private sectors’ funds,technology and management advantages, improve the efficiency of resourcesutilization. Because of PPP projects’ important role in national economy and nationallife, the success of their implementation is particularly important. In fact, PPPprojects’ profits and effectiveness are unstable; many projects are facing losses andrisk of failure. PPP project governance becomes a serious and urgent problem. Tosolve this problem, we need to analyze PPP project’s cooperation mechanism andidentify factors which influence the success of PPP project, and then establisheffective PPP project governance mechanism.This research indicates that PPP model is cooperation between public sectors andprivate sectors based on incomplete contract and there exists interest conflict andinformation asymmetry between the two sectors. Factors influencing PPP project’ssuccessful implementation include: partnership between public and private sectors,investment structure, motivation and supervision of private sectors. Based on theseresults, this research introduces governance theory, property rights theory, incompletecontract theory and principal-agent theory, and establishes the PPP project governanceframework from two aspects including property rights structure and governmentregulation.Considering PPP project property rights governance, this research preliminarilydetermines the basic property structure of non-profit PPP project, profit PPP projectand quasi-profit PPP project combined with project division theory. To allocate theproperty rights in the mixed structure, this research considers social welfare anddiscusses different property rights proportion’s influence on project efficiency throughmathematical derivation of game theory. The conclusions include: in the PPP projectmixed property right structure, the private sector is better motivated to increase theproject efficiency with a bigger property rights percentage; but it is necessary tobalance the project profit and consumer surplus by giving private sector subsidies to restrict private sector’s self-interest investment.Considering PPP project government regulation, the research summarizesgovernment regulation problems of PPP projects in China and put forward politicalproposals to improve PPP regulation framework. This research then builds regulatorymechanism from three aspects including market entry and exit, projectimplementation, and pricing of product or service, and designs the pricing mechanismusing principal-agent theory. Measures to solve information asymmetry in PPPprojects include the use of screening methods to solve adverse selection problems andthe application of incentive contract to solve moral risk problems.