Causal relationships of moral hazard and adverse selection of Ghanaian public-private partnership (PPP) construction projects
Owusu-Manu, D. and Kukah, A. and Edwards, D.J. and Parn, Erika and El-Gohary, Hatem and Aigbavboa, C. (2018) Causal relationships of moral hazard and adverse selection of Ghanaian public-private partnership (PPP) construction projects. Journal of Engineering, Design and Technology, 16 (3). pp. 439-460. ISSN 1726-0531
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Abstract
The aim 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 Modeling (SEM) was used to explore the causes and effects relationships 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.
To test the proposed framework, a quantitative methodology was employed, in which, data were collected using research questionnaires that targeted a sample of two-hundred and eighty public-private-partnership (PPP) stakeholders in Ghana. A total of two hundred and ten useable questionnaires were retrieved representing a response rate of seventy-five percent.
The interrelationships between the eight causes and 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.
This 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.
The 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.
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