| PPP (Public-Private Partnership) is an important model that the public sectors and private ones collaborate to supply the public goods and public service, and it is widely applied by governments all around the world in supplying huge infrastructures that cost much in recent years. China is still in the progress of industrialization and urbanization for a long term, demand of infrastructures and other public goods remains strong. With the transformation of government functions and the improvement of legal systems, private capital will have a big role to play in providing public goods.Different from normal firms or other organizations, the authority of PPP source partly from the public power holds by the public sector. Especially in current political and legal system of our country, public power is the major factor that determines the failure or success of PPP projects, and this point makes great difference from PPP applied in western countries. The corporate governance theory points that the match of residual rights of claim and residual rights of control is the most efficient mode, but this view can’t fully apply to the governance of PPP companies. In addition, the allocation of income was usually well defined in the initial contract of most PPP projects, and the present research concern less about this.This article impresses that the genuine nature of PPP is the contract between public sector and private sector, under the foundation of incomplete contract theory and public goods theory, this article research on the allocation of residual control rights and its effect on parties’investment level. Research shows that the optimal allocation of residual control rights depends on the parties’respective degree of optimism of the expectation on the final return, both parties’technological factors, and the allocation of income provided by the initial contract when there is a proposal of income allocation existed in the initial contract. |
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