**Table 4: Fixed effects estimations – Cost of debt and leverage**

||(1)<br>Leverage|(2)<br>Leverage|(3)<br>Ln (liab)|(4)<br>Ln (liab)|(5)<br>Ln (liab)|(6)<br>Ln (liab)|(7)<br>Ln (liab)|(8)<br>Ln (liab)|
|---|---|---|---|---|---|---|---|---|
|Interest|0.003<br>(0.003)||-0.012<br>(0.009)|-0.013<br>(0.009)|-0.035***<br>(0.010)||||
|PC*Interest|-0.005<br>(0.003)||-0.023***<br>(0.008)|-0.022***<br>(0.008)|-0.024***<br>(0.008)||||
|Spread||0.011**||||0.002|0.001|-0.013|
|||(0.004)||||(0.020)|(0.020)|(0.017)|
|PC*Spread||-0.010**||||-0.033***|-0.033***|-0.039***|
|||(0.005)||||(0.012)|(0.012)|(0.013)|
|MIG|0.177|0.176|-0.593|-0.619|-0.460|-0.578|-0.600|-0.795|
||(0.119)|(0.118)|(0.463)|(0.469)|(0.446)|(0.469)|(0.475)|(0.533)|
|Flexible term|0.021|0.012|0.325|0.339|0.491|0.288|0.301|0.403|
||(0.054)|(0.055)|(0.319)|(0.321)|(0.316)|(0.328)|(0.330)|(0.328)|
|Sector lev|0.489**|0.497**|2.657***|2.649***|2.220***|2.661***|2.648***|2.393***|
||(0.204)|(0.196)|(0.695)|(0.705)|(0.635)|(0.712)|(0.720)|(0.686)|
|Ln (Assets)|0.000<br>(0.047)|0.003<br>(0.047)|||||||
|ROA|-0.217|-0.218|-0.839**|-0.873**|-0.864***|-0.858***|-0.897**|-0.863***|
||(0.211)|(0.211)|(0.329)|(0.371)|(0.318)|(0.317)|(0.357)|(0.313)|
|GDP growth|0.785|0.848*|3.491**|3.441**|1.068|3.800**|3.746**|3.637**|
||(0.483)|(0.482)|(1.508)|(1.533)|(1.328)|(1.642)|(1.661)|(1.532)|
|Inflation|0.016|0.026|-0.266|-0.255|-1.198|-0.622|-0.615|-1.166|
||(0.383)|(0.360)|(1.461)|(1.483)|(1.441)|(1.432)|(1.453)|(1.487)|
|Bond cap|-0.005|-0.003|0.021|0.021|0.034**|0.040**|0.040**|0.046***|
||(0.008)|(0.008)|(0.016)|(0.017)|(0.015)|(0.016)|(0.016)|(0.015)|
|Stock market|-0.008***|-0.008***|-0.056***|-0.057***|-0.081***|-0.057***|-0.058***|-0.069***|
||(0.003)|(0.003)|(0.013)|(0.013)|(0.015)|(0.013)|(0.013)|(0.014)|
|Constant|0.505|0.355|14.011***|14.091***|15.441***|13.454***|13.529***|14.323***|
||(0.797)|(0.817)|(0.616)|(0.628)|(0.628)|(0.765)|(0.771)|(0.695)|
|Observations|817|817|820|808|820|820|808|820|
|Projects|111|111|114|114|114|114|114|114|
|R-squared|0.10|0.10|0.20|0.20|0.23|0.19|0.19|0.20|
|Year dummies|Yes|Yes|Yes|Yes|Yes|Yes|Yes|Yes|

Robust standard errors in parentheses. Standard errors are clustered by firm. Columns (1) to (2): The dependent variable is the ratio of total liabilities to total assets (book values). Column (2) is identical to column (1) except that the lending interest rate is replaced by the interest rate spread (including the interaction term). Columns (3) to (8): The dependent variable is the natural logarithm of real liabilities. Column (3) uses the full sample, column (4) excludes extreme outliers and column (5) is identical to column (3) except that the interest rate is lagged one period. Columns (6) to (8) replicate columns (3) to (5) respectively, with the lending interest rate replaced by the interest rate spread (including the interaction term). *** p<0.01, ** p<0.05, * p<0.1

# **7. Conclusion**

PPPs and concession contracts have become a popular mechanism for delivering big infrastructure projects. The understanding of how such projects are financed, and why, is still relatively limited however. It has been argued that private investors use leverage to secure higher prices. This is feasible if the regulator wants to avoid bankruptcy. Ehrhardt & Irwin (2004, p.47) argue that “probably the main reason why governments do not like to see private infrastructure providers go bankrupt is the fear of 20