scholarly journals An empirical examination of moral hazards and adverse selection on PPP projects

2018 ◽  
Vol 16 (6) ◽  
pp. 910-924 ◽  
Author(s):  
De-Graft Owusu-Manu ◽  
David John Edwards ◽  
A.S. Kukah ◽  
Erika Anneli Parn ◽  
Hatem El-Gohary ◽  
...  
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Construction Projects ◽  
Accurate Information ◽  
Empirical Examination ◽  
Relative Significance ◽  
Content Type ◽  
Moral Hazards ◽  
Selection Problems ◽  
Research Findings

Purpose Failures of public–private partnership (PPP) projects are often ascribed to the agency problem, which arise under conditions of inadequate and asymmetric information when a principal (the client) hires an agent (the contractor). This paper aims to identify the causes and effects of moral hazard and adverse selection on PPP construction projects using a synthesis of extant literature (to determine key variables) and analysis of survey questionnaire data collected. Design/methodology/approach Mean score ranking was used to rank the causes and effects of moral hazard and adverse selection problems in PPP construction projects. One sample t-test was conducted to establish the relative significance of these variables. Findings Effort dimensions (which are not verifiable), low transfer of risk, lack of accurate information about project conditions, wrong party chosen to execute project and renegotiation of contracts were the most significant causes of moral hazard and adverse selection problems in PPP construction projects. In addition, reduction of competition, high transaction costs, consequences on profitability of project, siphoning of funds and negative implications on enforceability of contract were the most significant effects of moral hazard and adverse selection problems in PPP construction projects. Practical implications Application of these findings will help mitigating moral hazard and adverse selection problems occurring when undertaking PPP construction projects. Originality/value Research findings provide guidance to construction stakeholders in the PPP sector on the different causes and effects of adverse selection and moral hazard. This pioneering study is the first to conduct an empirical assessment of the causes and effects of moral hazard and adverse selection of PPP construction projects in a developing country.

scholarly journals Causal relationships of moral hazard and adverse selection of Ghanaian Public-Private-Partnership (PPP) construction projects

2018 ◽  
Vol 16 (3) ◽  
pp. 439-460 ◽  
Author(s):  
De-Graft Owusu-Manu ◽  
A.S. Kukah ◽  
David John Edwards ◽  
Erika Anneli Pärn ◽  
Hatem El-Gohary ◽  
...  
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Construction Projects ◽  
Public Private Partnership ◽  
Likelihood Method ◽  
Parameter Estimates ◽  
Causal Relationships ◽  
Private Partnership ◽  
Content Type ◽  
Selection Of

PurposeThe purpose of this paper was to assess the causal relationship(s) between moral hazard and adverse selection of public–private partnership (PPP) construction projects. Structural equation modelling (SEM) was used to explore the cause and effect relationship between moral hazard and adverse selection problems in PPP construction projects in Ghana. The study produced a framework to predict, estimate and depict the complex causal relationships (i.e. the directionality) between moral hazard and adverse selection.Design/methodology/approachTo test the proposed framework, a quantitative methodology was used, in which, data were collected using research questionnaires that targeted a sample of 280 PPP stakeholders in Ghana. In total, 210 useable questionnaires were retrieved, representing a response rate of 75 per cent.FindingsThe interrelationships between the eight causes and the nine effects of moral hazard and adverse selection were established using the model. The tested framework showed the degree of association and isolation of the unobserved variables on the indicator factors. Confirmatory factor analysis (CFA) was used to evaluate the fit of items to latent constructs. Because the fit of each model was good and the item loadings were adequate, it was assumed that the indicators of the different variables factors were fitting. Furthermore, a diagnostic fit analysis was conducted using the robust maximum likelihood method to test the statistical significance of the parameter estimates.Practical implicationsThis novel research is one of the few studies investigating the causal relationships between moral hazard and adverse selection of PPP construction projects. The research concluded with future studies that seek to validate the model developed in other countries and/or other industries.Originality/valueThe research findings will serve as a guide for construction stakeholders in the PPP sector on the causes and effects of adverse selection and moral hazard and how to mitigate these.

scholarly journals Exploring strategies to reduce moral hazard and adverse selection of Ghanaian public–private partnership (PPP) construction projects

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
De-Graft Owusu-Manu ◽  
Augustine Senanu Kukah ◽  
Frank Boateng ◽  
George Asumadu ◽  
David John Edwards
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Construction Projects ◽  
Technical Assistance ◽  
Public Private Partnership ◽  
Private Partnership ◽  
Content Type ◽  
Project Failures ◽  
Level Of Agreement ◽  
Selection Of

Purpose Conditions of inadequate and asymmetric information when an agent is hired by a principal have resulted in the problems of moral hazard and adverse selection (MHAS) in public–private partnership (PPP) construction projects. The purpose of this study is to explore strategies to reduce MHAS in PPP construction projects. Design/methodology/approach Questionnaires were used to elicit responses from respondents. Mean score ranking was used to rank these strategies while reliability analysis was conducted using Cronbach’s alpha coefficient and level of agreement tested using Kendall’s concordance. Factor analysis grouped the strategies into eight components. Findings From the mean score ranking, monitoring; transfer of risks; screening; managing of construction risks; and increased incentives to control costs were the most significant strategies. The eight components were transparent process and contract, incentives and monitoring, screening and technical assistance, unbundling and benchmarking, funding and small liabilities, information clarification and signaling, risk and contract management and cooperation and finance factors. Practical implications The findings of this study have identified the most significant strategies to reduce MHAS on PPP construction projects to serve as a guide to PPP practitioners in reducing MHAS. Originality/value The output of this research contributes to the checklist of strategies that reduce PPP project failures arising from MHAS and contributes to the development of the agency theory.

High-value, low-effort industrial plant commissioning solution strategies

2019 ◽  
Vol 19 (4) ◽  
pp. 653-671 ◽  
Author(s):  
Brant Mock ◽  
James T. O'Connor
Keyword(s):  
Construction Projects ◽  
Industrial Plant ◽  
Industrial Construction ◽  
Content Type ◽  
Electronic Survey ◽  
Effective Strategies ◽  
Solution Strategies ◽  
Research Findings ◽  
Type Construction ◽  
Practical Implications

Purpose The main purpose of this paper is to identify high-value, low-effort solution strategies to common commissioning and startup (CSU) problems experienced during industrial construction projects. Design/methodology/approach Data on the value provided by solution strategies and effort required to implement them were collected from 35 industry experts via an electronic survey. The authors used a PICK (Possible, Implement, Challenge and Kill) chart two-axis modeling method to distinguish high-value, low-effort strategies from among the set of 178 possible solution strategies to the 20 most common CSU problem activities. Findings A total of 38 strategies were identified by industry experts as both high-value and low-effort solutions to the most common CSU problems experienced on industrial construction projects. The 20 common CSU problems had an average of almost nine solution strategies each, of which an average of almost two were identified as high-value, low-effort. Research limitations/implications The research findings are limited to industrial-type construction projects; however, parallels may exist with heavy civil, commercial and other types of construction. The sample size was relatively small but in accord with other CSU surveys. Practical implications Managers are provided a list of 38 highly effective strategies to use when they encounter common CSU problems. By implementing these strategies, managers will provide their projects with more benefit for less investment. Originality/value Although several studies have identified solution strategies to CSU problems, none have sought to differentiate between strategies. This study distinguishes between an extensive set of 178 strategies along both effort and value metrics, identifying high-value, low-effort strategies using a novel application of the PICK chart model.

Significant causes of claims and disputes in construction projects in Saudi Arabia

2019 ◽  
Vol 9 (5) ◽  
pp. 597-615 ◽  
Author(s):  
Sadi Assaf ◽  
Mohammad A. Hassanain ◽  
Abdullatif Abdallah ◽  
Ahmed M.Z. Sayed ◽  
Abdulrahman Alshahrani
Keyword(s):  
Saudi Arabia ◽  
Construction Industry ◽  
Construction Projects ◽  
Design Methodology ◽  
Business Environment ◽  
Relative Significance ◽  
Content Type ◽  
Key Stakeholders ◽  
Strong Performance ◽  
The Individual

Purpose Projects in the construction industry have been confronted with an unprecedented volume of claims, which negatively impact the construction business environment. The purpose of this paper is to identify and assess the major causes of claims and disputes, from the perspectives of three key stakeholders. Design/methodology/approach An online and paper-based questionnaire was distributed to a random sample of 250 professionals. Responses from 86 construction professionals were obtained. The significance index was employed to rank the factors and hence assess their relative significance. Results were analyzed from both the individual stakeholder, and collective perspectives. Test of agreement was also conducted. Findings The research found the following causes to be the most significant contributors to claims and disputes in Saudi Arabia: “change or variation orders due to new requirements from client” (78 percent), “variations in quantities due to new requirements from client” (74 percent), “delay caused by contractor” (74 percent), “design errors or omissions” (72 percent) and “inconsistencies in the drawings and specifications” (70 percent). Originality/value The research provides an in-depth assessment of the causes of claims and disputes, in the setting of a fast growing industry, in which strong performance is essential to continued success. Unlike several of the reviewed studies which reported “delay caused by the owner” or “delayed in payment” as a major cause of claims and/or disputes, the findings of the current study indicated that this cause was not the most significant. Instead, it was determined that the top causes of claims and disputes were attributed to all parties, including consultants, contractors and clients.

Moral hazard and risk-taking incentives in Islamic banks, does franchise value matter!

2017 ◽  
Vol 10 (1) ◽  
pp. 42-59 ◽  
Author(s):  
Mehdi Mili ◽  
Sami Abid
Keyword(s):  
Moral Hazard ◽  
Risk Taking ◽  
Bank Risk ◽  
Islamic Banks ◽  
Total Risk ◽  
Empirical Examination ◽  
Content Type ◽  
Islamic Bank ◽  
Franchise Value ◽  
The Impact

Purpose This paper aims to examine risk-taking in Islamic banks by exploring moral hazard and owner/manager agency problems simultaneously. Design/methodology/approach The authors propose to estimate a model of bank risk-taking that includes both franchise value and ownership structure as explanatory factors of bank risk. Findings The results show that franchise value is an important determinant of Islamic bank risk-taking. Banks with high franchise values are less likely to take risks than banks with low franchise value. In contrast, outside block holders have, at best, limited influences on bank risk-taking. Originality/value This paper conducts the first empirical examination of the relationship between managerial risk preferences and Islamic banks ownership. The authors examine simultaneously the effect of franchise value and owner/manager problem on Islamic bank risk taking behavior. They consider separately the impact on total risk, systematic risk and bank specific risk.

scholarly journals Sustainable regeneration project delivery in UK

2018 ◽  
Vol 16 (1) ◽  
pp. 87-100 ◽  
Author(s):  
Julius Akotia ◽  
Alex Opoku
Keyword(s):  
Construction Projects ◽  
Project Delivery ◽  
Structured Interviews ◽  
Content Type ◽  
Level Of Involvement ◽  
Project Life Cycle ◽  
Research Findings ◽  
The Uk ◽  
Project Life ◽  
Source Of Information

Purpose The purpose of this paper is to explore the key practitioners’ level of involvement in the delivery of sustainable regeneration projects in the UK. Practitioners’ level of involvement is a major factor that has and continues to determine the delivery of sustainability outcomes of regeneration projects. Design/methodology/approach The paper adopted a qualitative study that obtained data from 21 key practitioners through semi-structured interviews in exploring practitioners’ level of involvement in the delivery of sustainable regeneration projects in the UK. The semi-structured interviews are conducted with seven practitioners, each from the three construction organisations selected through a purposive sampling approach for the study. Findings The findings identify varied levels of involvement of the key practitioners at the three delivery stages – early, construction and post-construction of the projects. The findings further reveal that clients’ representatives, commercial managers and architects are the most frequently involved practitioners during the early stages of the projects. The findings also indicate that practitioners who have sustainability assigned to their roles and their responsibilities, such as sustainability managers, are the least involved in all the three delivery stages of the projects. Research limitations/implications The study involves interview with 21 practitioners from three organisations delivering sustainable regeneration projects; hence, this could limit the generalisation of the research findings. However, the findings of this study could serve as a useful source of information for the further study in this area. Practical implications The paper is of the view that the level of key practitioners’ involvement in the delivery of the projects will have an impact on their knowledge and will determine how sustainability benefits are promoted and delivered from the projects. Originality/value Although some studies have been carried out on practitioners’ engagement in the delivery of “normal” construction projects, none has focussed on practitioners’ levels of involvement in sustainable regeneration projects. Hence, this study has brought to the fore how the key practitioners tasked with the responsibilities of delivering sustainability benefits of regeneration projects have been involved (at various levels of the project life cycle) in the delivery of these projects.

scholarly journals Employment-Friendly Welfare Policy and Information Asymmetry: Evidence from Sweden and Korea

2016 ◽  
Vol 31 (1) ◽  
pp. 133-152
Author(s):  
Kwon Illoong ◽  
Lee Jin Ho
Keyword(s):  
Moral Hazard ◽  
Information Asymmetry ◽  
Adverse Selection ◽  
Welfare Policy ◽  
Tax Policies ◽  
Unemployment Benefits ◽  
Policy Reforms ◽  
Welfare Policies ◽  
Selection Problems ◽  
Theoretical Predictions

This paper provides a simple theoretical framework for analyzing how welfare polices can affect the incentive to work and compares the recent welfare policy reforms of Sweden and Korea. Sweden has systematically reformed its welfare policies in response to slowing population and economic growth and an aging population. This paper shows that recent Swedish reforms of tax policies and unemployment benefits bear out theoretical predictions that such reforms will help reduce moral hazard and adverse selection problems. In comparison, recent Korean reforms of tax policies and unemployment benefits have focused on moral hazard problems but have largely ignored adverse selection problems.

Synchronicity of global construction cost indexes

2019 ◽  
Vol 26 (3) ◽  
pp. 367-385 ◽  
Author(s):  
Ruixi Zhang ◽  
Jinding Xing ◽  
Kunhui Ye ◽  
Weisheng Lu ◽  
Yongwei Shan
Keyword(s):  
Construction Projects ◽  
Rank Correlation ◽  
Construction Cost ◽  
Steady Increase ◽  
Content Type ◽  
Body Of Knowledge ◽  
Maximum Variance ◽  
Kendall Rank Correlation ◽  
Research Findings ◽  
Global Construction

Purpose The purpose of this paper is to examine the features and tendency of cost indices in the global construction setting. Design/methodology/approach Data from 22 countries/regions are collected and analyzed using maximum variance formulation and Kendall rank correlation coefficient. Findings It is found that global construction cost indexes (CCIs) have commonly maintained a steady increase for decades, and the CCIs synchronize with each other. Overall synchronicity and synchronicity of different countries pairs have increased with time significantly. Research limitations/implications The major limitation, however, is the availability of data: only 22 regions/countries are examined, the distribution of these regions/countries is imbalanced between different continents and various indices are adopted around the world, of which statistical methods are not same. Practical implications The implication is that a better perception of CCIs enables contractors to have a robust estimation for bidding prices and to improve the efficiency of construction projects management. The research findings also provide a useful reference for those countries that have not established construction cost indices databases to forecast the tendency of domestic construction industries. Originality/value This paper contributes to the overall body of knowledge by presenting the co-movement of global CCIs and measuring the changes of CCI synchronicity with time and in different countries pairs.

Nature of construction project cultures in the public sector: case studies in Sri Lanka

2018 ◽  
Vol 8 (5) ◽  
pp. 557-568 ◽  
Author(s):  
Aparna Samaraweera ◽  
Sepani Senaratne ◽  
Y.G. Sandanayake
Keyword(s):  
Public Sector ◽  
Case Studies ◽  
Construction Projects ◽  
Construction Project ◽  
Content Type ◽  
The Public ◽  
Research Findings ◽  
Project Participants ◽  
Project Culture ◽  
Project Objectives

Purpose Cultural differences cause conflicts amongst construction project participants, deterring the success of projects. Understanding such different cultural manifestations could help the removal of the misunderstandings amongst sub-cultural groups and removal of formal irrationalities deterring the progress of construction projects. The purpose of this paper is to explore the nature of project cultures in the public sector construction projects. Design/methodology/approach An exploratory case study was selected as the research strategy to achieve the research aim. Three public sector building construction projects were used as case studies. Nine semi-structured interviews and observation of two progress review meetings per case were used for data collection. Findings As per the research findings, contractors believed that construction project culture emerged and transferred through continuous interactions and socialisations with time. Consultants believed that culture was emerged focusing on clearly defined project objectives. In addition, all members assumed that project members at high authority levels were contributing more for the emergence and transfer of cultural aspects. Levels of culture and power existed within the public sector project culture as clients with the highest power, consultants the next and contractors with the least power. Public sector project culture was not leader centred. Shared behavioural norms were not much popular in project culture. Highly differentiated behavioural norms, demonstrating clear professional sub-cultures for the client, contractor and consultant, were available. Originality/value The research findings are helpful to construction project managers to enhance the level of motivation, productivity, commitment, continuous interactions and socialisations of project participants and to avoid any negative outcomes in behaviours.

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