Factors Influencing the Equity Share of Build-Operate-Transfer Projects

Purpose – The purpose of this paper is to determine the fundamental factors influencing the equity share in build-operate-transfer (BOT) investments in relation to the project risk profile. Design/methodology/approach – The relationships between risk factors and equity participation into the capital structure of a BOT contract are examined using regression analysis of a dataset of toll road projects. Findings – Results suggest that the inflation rate, the size of the investment, the construction period, the solidity of the vehicle company, and the organizational structure of the project are significant variables of the equity portion of financing. Practical implications – The analysis may support project promoters by providing better understanding of the factors that might facilitate high debt leverages and by providing lending institutions with valuable information to integrate the method of determining the appropriate debt resources to be injected into a BOT project. Originality/value – The paper contributes towards growing the body of knowledge regarding the way public-private partnership initiatives are carried over and helps refine the capital structures of BOT projects.