Public-private partnership (PPP) projects often face challenges in achieving value for money and avoiding public resource waste. Government governance capacity (GGC), a key factor in attracting private participation, is increasingly recognized. However, little is known about the impact of GGC on PPP risks. This study explores how GGC affects PPP risks and proposes policy recommendations.
This study uses data from 30 Chinese provinces covering the period from 2006 to 2022. The research hypotheses were tested using two-way fixed effects, mediation and moderation models, system generalized method of moments and multidimensional heterogeneity analysis.
Research shows that improving GGC reduces PPP risks, with significant heterogeneity. Regionally, GGC has a significantly negative impact on PPP risks in non-suspended infrastructure investment areas, but its effect is not significant in suspended areas. Temporally, the inhibitory effect of GGC on PPP risks is linked to policy implementation. With higher land fiscal revenue, GGC is more effective. Mechanism analysis shows that GGC reduces PPP risks mainly by improving the business environment and reducing intervention. Further research suggests that as fiscal revenue and innovation rise, the inhibitory effect of GGC on PPP risks has strengthened.
This study contributes in three ways: (1) It expands the GGC indicator system by adding public safety to the World Governance Indicators dimensions – efficiency, regulation, rule of law and corruption. (2) A macro-level analysis of PPP risks was conducted, creating a more comprehensive risk assessment framework. (3) This study introduces GGC into PPP risk research, exploring government intervention and business environment as mediators and highlighting governance’s key role in PPP projects.
