IDEAS home Printed from https://ideas.repec.org/a/eee/crpeac/v22y2011i7p668-681.html
   My bibliography  Save this article

Accounting, regulation and profitability: The case of PFI hospital refinancing

Author

Listed:
  • Toms, Steven
  • Beck, Matthias
  • Asenova, Darinka

Abstract

The refinancing of PFI (Private Finance Initiative) projects represents one of the most contentious aspects of Public Private Partnerships (PPPs) in the UK. The negative publicity associated with UK PFI refinancing deals is associated with several factors, including, evidence of massive private sector profit making, the failure of private sector financiers to share refinancing profits and, lastly, private sector frustration of adequate regulatory intervention in this area. Utilising a dynamic model of capital market and state interaction, this paper explains these outcomes as a function of effective private sector lobbying of bureaucratic state agencies to alter the structure of accounting, accountability and regulation with the goal of securing favourable profit and risk outcomes. These dynamics are illustrated with reference to the history of UK PFI refinancing and a case study of one of the projects where these gains reached extreme levels.

Suggested Citation

  • Toms, Steven & Beck, Matthias & Asenova, Darinka, 2011. "Accounting, regulation and profitability: The case of PFI hospital refinancing," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 22(7), pages 668-681.
    • Handle: RePEc:eee:crpeac:v:22:y:2011:i:7:p:668-681
    DOI: 10.1016/j.cpa.2011.01.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1045235411000335
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.cpa.2011.01.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    2. Ron Hodges & Howard Mellett, 2005. "Accounting for the U.K.'s Private Finance Initiative: An Interview‐Based Investigation," Abacus, Accounting Foundation, University of Sydney, vol. 41(2), pages 159-180, June.
    3. Donald W. Light, 1998. "Effective Commissioning: Lessons from purchasing in American managed care," Monograph 000437, Office of Health Economics.
    4. Darinka Asenova & Matthias Beck, 2003. "The UK Financial Sector and Risk Management in PFI Projects: A Survey," Public Money & Management, Taylor & Francis Journals, vol. 23(3), pages 195-202, July.
    5. Asenova, Darinka & Beck, Matthias, 2010. "Crucial silences: When accountability met PFI and finance capital," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 21(1), pages 1-13.
    6. Grout, Paul A, 1997. "The Economics of the Private Finance Initiative," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(4), pages 53-66, Winter.
    7. Froud, Julie, 2003. "The Private Finance Initiative: risk, uncertainty and the state," Accounting, Organizations and Society, Elsevier, vol. 28(6), pages 567-589, August.
    8. Declan Gaffney & Allyson M. Pollock, 1999. "Pump-Priming the PFI: Why are Privately Financed Hospital Schemes Being Subsidized?," Public Money & Management, Taylor & Francis Journals, vol. 19(1), pages 55-62, January.
    9. Cebula, Richard J. & Hung, Chao-Shun & Manage, Neela, 1992. "Deficits and interest rates: : An analysis examining some neglected variables," International Review of Economics & Finance, Elsevier, vol. 1(4), pages 379-387.
    10. M Iqbal Khadaroo, 2005. "An institutional theory perspective on the UK's Private Finance Initiative (PFI) accounting standard setting process," Public Management Review, Taylor & Francis Journals, vol. 7(1), pages 69-94, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shujun Ding & Chunxin Jia & Zhenyu Wu, 2016. "Mutual Fund Activism and Market Regulation During the Pre-IFRS Period: The Case of Earnings Informativeness in China from an Ethical Perspective," Journal of Business Ethics, Springer, vol. 138(4), pages 765-785, November.
    2. Peda, Peeter & Vinnari, Eija, 2020. "The discursive legitimation of profit in public-private service delivery," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 69(C).
    3. Jing Du & Hongyue Wu & Xianbo Zhao, 2018. "Critical Factors on the Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective," Sustainability, MDPI, vol. 10(6), pages 1-27, June.
    4. Morales, Jérémy & Sponem, Samuel, 2017. "You too can have a critical perspective! 25 years of Critical Perspectives on Accounting," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 43(C), pages 149-166.
    5. Horacio Ortiz, 2022. "Political Imaginaries of the Weighted Average Cost of Capital: A Conceptual Analysis," Post-Print halshs-03513082, HAL.
    6. Cooper, Christine, 2015. "Accounting for the fictitious: A Marxist contribution to understanding accounting's roles in the financial crisis," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 30(C), pages 63-82.
    7. Cuthbert, J.R. & Cuthbert, M., 2012. "Why IRR is an inadequate indicator of costs and returns in relation to PFI schemes," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(6), pages 420-433.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Demirag, Istemi & Khadaroo, Iqbal & Stapleton, Pamela & Stevenson, Caral, 2011. "Risks and the financing of PPP: Perspectives from the financiers," The British Accounting Review, Elsevier, vol. 43(4), pages 294-310.
    2. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Public-Private Partnerships : Risk Allocation and Value for Money," Other publications TiSEM b9218010-a357-4c0a-805a-7, Tilburg University, School of Economics and Management.
    3. Khadaroo, Iqbal, 2014. "The valuation of risk transfer in UK school public private partnership contracts," The British Accounting Review, Elsevier, vol. 46(2), pages 154-165.
    4. Chung, Demi & Hensher, David A. & Rose, John M., 2010. "Toward the betterment of risk allocation: Investigating risk perceptions of Australian stakeholder groups to public-private-partnership tollroad projects," Research in Transportation Economics, Elsevier, vol. 30(1), pages 43-58.
    5. Salvatore Russo, 2013. "The swing of public-private partnership in the Italian hospitals. A comparative analysis of two case studies," Working Papers 21, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    6. Frédéric Marty & Arnaud Voisin, 2007. "Les difficultés d’exécution des Partenariats Public-Privé: le retour d’expérience des contrats de Private Finance Initiative britanniques," Documents de Travail de l'OFCE 2007-26, Observatoire Francais des Conjonctures Economiques (OFCE).
    7. Ricardo Ferreira Reis & Joaquim Miranda Sarmento, 2019. "“Cutting costs to the bone”: the Portuguese experience in renegotiating public private partnerships highways during the financial crisis," Transportation, Springer, vol. 46(1), pages 285-302, February.
    8. Roehrich, Jens K. & Lewis, Michael A. & George, Gerard, 2014. "Are public–private partnerships a healthy option? A systematic literature review," Social Science & Medicine, Elsevier, vol. 113(C), pages 110-119.
    9. Diane Dawson, 2001. "The private finance initiative: a public finance illusion?," Health Economics, John Wiley & Sons, Ltd., vol. 10(6), pages 479-486, September.
    10. Office of Health Economics, 2001. "The Economics of the Private Finance Initiative in the NHS," Monograph 000470, Office of Health Economics.
    11. Peda, Peeter & Vinnari, Eija, 2020. "The discursive legitimation of profit in public-private service delivery," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 69(C).
    12. Burke, Richard & Demirag, Istemi, 2015. "Changing perceptions on PPP games: Demand risk in Irish roads," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 27(C), pages 189-208.
    13. Jiangang Shi & Kaifeng Duan & Guangdong Wu & Rui Zhang & Xiaowei Feng, 2020. "Comprehensive metrological and content analysis of the public–private partnerships (PPPs) research field: a new bibliometric journey," Scientometrics, Springer;Akadémiai Kiadó, vol. 124(3), pages 2145-2184, September.
    14. Rodney P. Jones, 2023. "Addressing the Knowledge Deficit in Hospital Bed Planning and Defining an Optimum Region for the Number of Different Types of Hospital Beds in an Effective Health Care System," IJERPH, MDPI, vol. 20(24), pages 1-36, December.
    15. Peppel-Srebrny, Jemima, 2021. "Not all government budget deficits are created equal: Evidence from advanced economies' sovereign bond markets," Journal of International Money and Finance, Elsevier, vol. 118(C).
    16. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    17. Zijun Wang & Andrew J. Rettenmaier, 2008. "Deficits, Explicit Debt, Implicit Debt, and Interest Rates: Some Empirical Evidence," Southern Economic Journal, John Wiley & Sons, vol. 75(1), pages 208-222, July.
    18. Gergely Kicsák, 2017. "Developments in Government Interest Expenditure for Hungary, 2000–2015," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(1), pages 46-73.
    19. Lisa Baudot & Zhongwei Huang & Dana Wallace, 2021. "Stakeholder Perceptions of Risk in Mandatory Corporate Responsibility Disclosure," Journal of Business Ethics, Springer, vol. 172(1), pages 151-174, August.
    20. Galilea, Patricia & Medda, Francesca, 2010. "Does the political and economic context influence the success of a transport project? An analysis of transport public-private partnerships," Research in Transportation Economics, Elsevier, vol. 30(1), pages 102-109.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:crpeac:v:22:y:2011:i:7:p:668-681. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/critical-perspectives-on-accounting/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.