To read the full version of this content please select one of the options below:

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

De-Graft Owusu-Manu (Department of Building Technology, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana)
A.S. Kukah (Department of Building Technology, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana)
David John Edwards (School of Engineering and the Built Environment, Birmingham City University, Birmingham, UK and University of Johannesburg, Johannesburg, South Africa)
Erika Anneli Pärn (School of Engineering and the Built Environment, Birmingham City University, Birmingham, UK and University of Johannesburg, Johannesburg, South Africa)
Hatem El-Gohary (BLSS, Birmingham City University, Birmingham, UK and College of Business and Economics, Qatar University, Qatar and Cairo University Business School, Cairo University, Cairo, Egypt)
Clinton Aigbavboa (Faculty of Engineering and the Built Environment, University of Johannesburg, Doornfontein, South Africa)

Journal of Engineering, Design and Technology

ISSN: 1726-0531

Article publication date: 15 June 2018

Issue publication date: 3 July 2018

Downloads
337

Abstract

Purpose

The 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/approach

To 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.

Findings

The 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 implications

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.

Originality/value

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.

Keywords

Citation

Owusu-Manu, D.-G., Kukah, A.S., Edwards, D.J., Pärn, E.A., El-Gohary, H. 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, Vol. 16 No. 3, pp. 439-460. https://doi.org/10.1108/JEDT-12-2017-0137

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited