Table A4.1.1: Sources and Description of Variables
Variable | Description | Characteristic, Units | Source |
Gearing | Gearing ratio (debt over costs) | Project, % | Thomson One Banker |
Country, quarter, % | Datastream | ||
Inflation | CPI seasonally adjusted, YoY change | Country, quarter, % | Datastream |
Government debt | General government gross debt, % of GDP | Country, year, % | Datastream |
Volatility (GDP) | Rolling standard deviation of GDP (5 previous years and current quarter) | Country, quarter, % | CEIC Data Company, Asian Development Bank (ADB) Asia Regional Integration (ARIC) |
Volatility (inflation) | Rolling standard deviation of Inflation (5 previous years and current quarter) | Country, quarter, % | |
Volatility (exchange rate) | Rolling standard deviation of log changes in local currency- dollar exchange rate (5 previous years and current quarter) | Country, quarter, % | |
PPP investment | Country, year, % | World Bank Private Participation in Infrastructure Database | |
Political stability | Political stability and absence of violence (estimate), lagged year | Country-year, range (-2.5 to 2.5) | World Bank Worldwide Governance Indicators |
Regulatory quality | Regulatory quality (estimate), lagged year | Country-year, range (-2.5 to 2.5) | World Bank Worldwide Governance Indicators |
Cost | Total cost | Project ($ million) | Thomson One Banker |
Maturity | Average maturity across term loans (equal weighting) | Project, years | Thomson One Banker |
Tranches | Number of term loans tranches | Project, range (1-6) | Thomson One Banker |
Foreign currency | = 1 when at least one term loan is denominated in foreign currency | Project, dummy | Thomson One Banker |
Syndicate size | Number of mandated arrangers | Syndicate, range (1-25) | Thomson One Banker |
= 1 when at least one mandated arranger is a multilateral development bank | Syndicate, dummy | Thomson One Banker | |
Local bank | Fraction of mandated arrangers (over syndicate size) headquartered in the same country of the project | Syndicate, range (0-1) | Thomson One Banker, Orbis database |
Tier 1 | Tier 1 ratio | Syndicate | Orbis database |
Return on average assets | Syndicate | Orbis database | |
Loans | Net loans over total assets | Syndicate | Orbis database |
Impaired over gross loans | Syndicate | Orbis database | |
Liquid assets | Liquid over total assets | Syndicate | Orbis database |
Cost/Income | Cost-to-income ratio | Syndicate | Orbis database |
CPI = consumer price index, GDP = gross domestic product, MDB = multilateral development bank, NPL = nonperforming loan, PPP = public-private partnership, ROAA = return on average assets, YoY = year-on-year.
Sources: See sources column.
Table A4.1.2: Project-Level Descriptive Statistics for Mature Markets
Variable | Mean | Median | 5th percentile | 95th percentile | Test of Differences | |
t-test | Wilcoxon | |||||
Gearing | 90.01 | 100.00 | 60.00 | 100.00 | 2.158** | 2.111** |
Cost | 481.90 | 184.10 | 34.00 | 2,135.60 | 1.914** | 4.289*** |
Maturity (EW) | 11.78 | 8.99 | 2.00 | 26.02 | -1.796* | -3.083*** |
Tranches | 1.65 | 1.00 | 1.00 | 3.00 | 1.828* | 2.279** |
Local currency | 0.87 | 1.00 | 0 | 1.00 | 3.362*** | 3.180*** |
Foreign currency | 0.13 | 0 | 0 | 1.00 | -3.362*** | -3.180*** |
Syndicate size | 3.60 | 2.00 | 1.00 | 10.00 | 5.416*** | 6.682*** |
0.16 | 0 | 0 | 1.00 | 1.585 | 1.631 | |
Local bank | 0.22 | 0 | 0 | 1.00 | -19.359*** | -13.820*** |
Tier 1 | 13.30 | 12.90 | 10.60 | 18.00 | 5.258*** | 6.252*** |
0.37 | 0.35 | -0.18 | 1.05 | -15.736*** | -13.137*** | |
Loans | 48.27 | 50.44 | 24.34 | 70.61 | -8.624*** | 8.696*** |
3.79 | 2.80 | 0.75 | 8.10 | 4.372*** | 2.806*** | |
Liquid assets | 22.49 | 21.75 | 11.07 | 45.11 | 14.470*** | 13.044*** |
Cost/Income | 62.94 | 61.87 | 45.17 | 88.56 | 7.089*** | 8.182*** |
EW = equally weighted, MDB = multilateral development bank, NPL = nonperforming loan, ROAA = return on average assets.
*** p < 0.01 ** p < 0.05 * p < 0.10
Source: Author's estimates, based on Thomson One Banker database.
Table A4.1.2 shows that projects in mature markets are larger than in developing markets and are more leveraged. Projects in mature markets have shorter maturities, involve more debt tranches, and are financed more in local currencies. These projects are financed by larger syndicates, and with less participation by local banks. Banks funding projects in mature markets are more capitalized, have more nonperforming loans and liquid assets, are less profitable and efficient, and have fewer loans on their balance sheets.
The characteristics of bank balance sheets are, overall, not very important for the model estimation. Table A4.1.3 shows some weak evidence that more profitable banks (column 2) and troubled banks (the ratio of impaired to total loans [columns 3 and 5]) are more likely to lend. One explanation is that banks that fund projects in mature PPP markets are based in countries where the quicker implementation of Basel III capital standards made their capital bases stronger than is the case for banks in Asia's developing markets.
Further, the analysis indicates that, in mature markets, project characteristics are more important. Gearing in particular is negatively associated with project size and positively associated with project duration. The evidence accords with the view that the project finance modality is more entrenched in mature markets and that bank lending is transaction-based. For macroeconomic variables, the results show a negative dependence of gearing ratios on government indebtedness, which is consistent with the analysis of developing Asian markets. But unlike the findings in Table 4.5, inflation as well as inflation risk now negatively affect project finance investment. Sector fixed effects for columns (1) and (2) in Table A4.1.2 show gearing ratios at their lowest for other sectors and at their highest for either energy (column 1) or transport (column 2).
Table A4.1.3: Drivers of Project Finance Deals in Mature Markets
Variable | Characteristic | (1) | (2) | (3) | (4) | (5) | (6) |
Tier 1 | Syndicate | 0.305 | 0.074 | 0.061 | -0.315 | -0.346 | -0.661 |
|
| (0.529) | (0.531) | (0.692) | (0.636) | (0.744) | (0.675) |
Syndicate | 5.421 | 7.194* | 5.893 | 7.721 | 6.297 | 5.576 | |
|
| (4.909) | (4.211) | (5.106) | (4.882) | (5.531) | (4.914) |
Loans | Syndicate | 0.069 | 0.072 | -0.020 | -0.015 | 0.036 | -0.030 |
|
| (0.152) | (0.144) | (0.169) | (0.144) | (0.178) | (0.155) |
Syndicate | 0.832 | 0.555 | 0.999* | 0.796 | 1.288* | 1.248 | |
|
| (0.561) | (0.571) | (0.573) | (0.562) | (0.776) | (0.764) |
Liquid assets | Syndicate | 0.024 | -0.016 | -0.122 | -0.129 | -0.175 | -0.125 |
|
| (0.177) | (0.145) | (0.183) | (0.154) | (0.201) | (0.188) |
Cost-to-income | Syndicate | -0.052 | 0.136 | 0.013 | 0.216 | 0.008 | 0.158 |
ratio |
| (0.210) | (0.226) | (0.232) | (0.224) | (0.257) | (0.249) |
Ln (syndicate | Syndicate | -2.071 | 5.076 | -1.386 | 6.180** | -0.523 | 6.189** |
size) |
| (1.795) | (3.227) | (1.868) | (2.946) | (1.927) | (2.882) |
Syndicate | -2.155 | -1.526 | -1.362 | -0.744 | -2.542 | -1.352 | |
|
| (3.704) | (3.142) | (4.084) | (3.433) | (4.017) | (3.044) |
Local bank | Syndicate | -6.177 | -4.921 | 0.009 | 2.347 | -3.054 | 1.185 |
|
| (4.123) | (4.146) | (5.144) | (4.845) | (4.977) | (4.771) |
Ln (cost) | Project |
| -6.112*** |
| -6.478*** |
| -6.059*** |
|
|
| (2.124) |
| (1.950) |
| (1.778) |
Ln (maturity) | Project |
| 3.888*** |
| 4.397*** |
| 5.299*** |
|
|
| (1.466) |
| (1.553) |
| (1.610) |
Ln (tranches) | Project |
| -1.030 |
| -1.703 |
| -1.470 |
|
|
| (2.317) |
| (2.424) |
| (2.525) |
Foreign | Project |
| 3.581 |
| 2.667 |
| 4.172 |
currency |
|
| (2.861) |
| (3.068) |
| (3.607) |
Country |
|
|
|
| -1.168 | -1.781 | |
|
|
|
|
|
| (3.955) | (3.434) |
Inflation | Country |
|
|
|
| -9.741** | -11.237** |
|
|
|
|
|
| (4.820) | (4.599) |
Government debt | Country |
|
|
|
| -5.336** | -5.980*** |
|
|
|
|
|
| (2.538) | (2.224) |
Volatility (GDP) | Country |
|
|
|
| 2.379 | 0.152 |
|
|
|
|
|
| (8.471) | (7.378) |
Volatility | Country |
|
|
|
| -57.267** | -62.933** |
(inflation) |
|
|
|
|
| (27.934) | (24.170) |
Volatility | Country |
|
|
|
| -88.768 | -578.378 |
(exchange rate) |
|
|
|
|
| (583.126) | (510.647) |
PPP investment | Country |
|
|
|
| 7.920 | 5.856 |
|
|
|
|
|
| (5.140) | (4.396) |
Political stability | Country |
|
|
|
| 61.947 | 56.247 |
|
|
|
|
|
| (37.928) | (38.372) |
Regulatory quality | Country |
|
|
|
| -17.738 | -38.839 |
|
|
|
|
|
| (53.789) | (48.840) |
Sector FE | Country | Yes | Yes | Yes | Yes | Yes | Yes |
Quarter FE | Country | No | No | Yes | Yes | Yes | Yes |
Country FE | Country | No | No | No | No | Yes | Yes |
Observations | Country | 173 | 173 | 173 | 173 | 173 | 173 |
Adjusted R2 | Country | 0.004 | 0.163 | (0.015) | 0.174 | 0.107 | 0.266 |
Syndicate characteristics (%) | Country | 60.10 | 16.95 | 18.93 | 10.45 | 13.76 | 8.79 |
Project characteristics (%) | Country |
| 73.56 |
| 46.48 |
| 30.11 |
Country characteristics (%) | Country |
|
|
|
| 33.07 | 22.47 |
Sector FE (%) | Country | 39.90 | 9.49 | 13.80 | 5.37 | 6.63 | 3.98 |
Quarter FE (%) | Country |
|
| 67.27 | 37.69 | 37.86 | 28.67 |
Country FE (%) | Country |
|
|
|
| 8.68 | 5.89 |
FE = fixed effects, GDP = gross domestic product, LN = natural logarithm, MDB = multilateral development bank, NPL = nonperforming loan, PPP = public-private partnership, ROAA = return on average assets.
Notes:
1. The table presents ordinary least squares regression results to examine the drivers of project-finance deals. The sample includes 173 projects financed from 2011 to 2016 in Australia, Canada, and the United Kingdom.
2. The dependent variable is the gearing ratio.
3. Standard errors (in parentheses) are clustered at the syndicate level to account for correlation among projects financed by the same syndicate of banks.
4. The last six rows of the table report the R2 decomposition for groups of variables (Shapley values, %).
*** p < 0.01 ** p < 0.05 * p < 0.10
Source: Author's estimates.