Allocation Of Control Rights In Project Financing

Regardless of the modalities, there are multiple stakeholders in the process of project financing, including the following main nine aspects:the project sponsors (the shareholders of the project company)、project company or project management company、 upstream suppliers of project product、 project product downstream purchasers or users of project facilities、lenders、project engineering construction contractors、insurance companies、financing consultants, lawyers and other. Because of the different interests concerned and investment of asymmetry in different stages of construction period and investment period, these subjects have expected to have adequate control over the process and final results of its implementation of the projects financed through effective financing lease arrangements in order to maximize their interests as well as the effective prevention of risks. And the problem of the project control and balance of contention between bodies, especially between project sponsors and the lenders becomes the most important issue in project financing and directly affects the success of financing. Thus, the control of the participants of the project financing needs to reach a more reasonable configuration through finance leases to ensure smooth progress of the entire financing process. However, scholars at home and abroad for the project financing of research are mainly concentrated in areas such as financing mode, capital structure and risk analysis. Based on game theory, the research on the project financing between the various stakeholders in the control of the configuration is also unusual, furthermore, the research on the right of control on project financing and lease conditions perfect for analysis is not. Targeting this outstanding problem-allocation of control rights in the process of project financing and combining domestic and international research outcome in project financing, this article attempts to fill this gap and summarizes contractual practice and research experience in project financing in China. On the basis of game theory, control rights, project management and contract theory, this article uses game model and solution to analyze behaviors of project finance lenders and sponsors and project company. Meanwhile, this article analyzes the optimal allocation of project finance control and its impact factors in order to optimize the key provisions in the project financing contract. This theoretical significance and practical application of research results is of great value in the following areas:improving efficiency and rationality of the control among stakeholders in project financing and risk allocation; achieving reasonable settings for financial contract conditions; raising the efficiency of project financing; leading and guaranteeing smooth progress of project financing and so on.The paper can be divided into seven parts, the main contents of various parts include:The chapter1is introduction, which mainly explores the background and significance of the problem, reviews the existing literature of project financing, and describes main research contents, research ideas, research methods and its innovation on the basis of the literature review.The chapter2is a series of reviews to basic theory, which mainly combs the project financing theory, control theory, game theory and contract theory, and puts a deep theoretical basis to the later study on allocation of control rights and mechanism design.The chapter3makes a deep analysis on the present situation of project financing and its allocation of control rights in China, and then find the main features and basic form of allocation of control rights our country’s project financing.The chapter4is based on allocation of control rights in project financing signal passing game, through regarding allocation of control rights as the signal, learning from the Spenser labor market signaling model, to build a line with China’s large-scale projects of the actual status of financing mechanisms and allocation of control rights model. By this model, the paper analyzes the equilibrium problem of allocation of control rights in project financing.The chapter5makes a game analysis on the configuration of control right in project financing. Along with the ideas and frameworks of Wang Lei (2010) and Tirole (2001), the paper conducts a dynamic game analysis on financing contract lenders and the allocation of control rights of the project operators from two aspects of the design of the financing contract and allocation of control rights, and then researches the impact factor of the right configuration and configuration mode in the process of project financing.The chapter6is the legal contract mechanism design of allocation of control rights in project financing. Combining with above findings of legal contract allocation of control rights in the financing analysis and game analysis, the paper proposes a legal contract mechanism from the angle of perfecting allocation of control rights in project financing.The chapter7is summary and outlook, which summarizes the full text of the study and points out the inadequacies of this study and future research directions.This study analysis makes a further development to game theory of the various stakeholders’allocation of control rights in the project financing process, which has an important theoretical and practical significance to improving the design efficiency of the project financing contract and the actual results, and to reducing the parties’ dispute in project financing.