The Financial Performance of an Innovative Megaproject

Abstract

The financial structure of megaprojects, known in the literature as project finance, is characterized by the creation of a legally independent project company financed with a concentrated equity ownership and a high level of non-recourse debt. Research in this field may yield new ideas and theories about the existing theoretical framework on capital structure, stakeholder management and risk management. A case-study is analyzed in this paper: the financial performance of the first metro line in Seville (Spain). In spite of previous cost overruns in the construction stage, the present operation stage is considered successful from the point of view of social and financial profitability, whereby the risks have been theoretically transferred to stakeholders, as defined by Value for Money considerations. The objective of this study involves: first to determine whether this megaproject meets the expectations for which it was created in terms of hope of return of the shareholders, and the expectations of the economic and financial feasibility under a change of subsidy policies; and secondly to determine whether the conditions remain for not including the investment as public debt. This issue is crucial in a budgetary constraint context for the planning of future metro lines. By taking this first experience into account, this article also provides information for potential participants in the projects of the new metro lines, which are currently in the planning stage.

The Regression Effect of Capital Structure and Firm Growth on the Firm value

“…The firm's profit is not only an indicator of its ability to fulfill obligations to its funders but also an element in creating firm value that shows the firm's prospects in the future. Irimia-Diéguez et al (2014) suggests that high profitability indicates good firm prospects so that investors will respond positively, and firm value will increase. The increasing dividend payout shows the firm's prospects are improving so that investors will be interested in buying shares, and the firm's value will increase.…”

“…Therefore, it is essential to study the firm's capital structure, profitability, and growth to know its effect on firm value in manufacturing companies listed on the IDX. Irimia-Diéguez et al (2014) found evidence that capital structure, firm growth, and profitability positively and significantly affect firm value in the banking sector that is Go Public on the JSX. The capital structure variable has a dominant effect on firm value.…”

Qualitative Study on the Effect of External Factors on Financial Literacy and Business Orientation Strategy Capability of SME Entrepreneurs in Indonesia

“…SMEs that are able to manage debt well will have access to greater resources and can grow their business more effectively. In addition, the ability to manage debt can also help SMEs develop better business relationships with other parties, such as lenders, suppliers, or business partners (Filieri, 2015;Irimia-Diéguez et al, 2014). To be able to manage debt well, SMEs must have a sound financial plan, choose the right source of funds, implement appropriate debt management policies, monitor cash flow regularly, establish good relationships with lenders, and use debt wisely.…”

Financing Preference Behaviour for Private Finance Initiative (PFI) Projects

“…Previous studies used the theory of Modigliani and Miller (1958) for corporate financing behaviour (Bikas et al, 2013;Danso & Adomako, 2014;Jurevičienė et al, 2014;Irimia-Diéguez et al, 2014).…”

“…PFI has a unique characteristic comprises project finance, in which its financial structure matters and investment decisions cannot be separated from funding decisions (Irimia-Diéguez et al, 2014). For the purpose of this study, another three theories are adopted as the fundamental of research.…”