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

Steve Toms; Matthias Beck; Darinka Asenova

doi:10.1016/j.cpa.2011.01.010

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

Steve Toms, Matthias Beck, Darinka Asenova

Management

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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.

Original language	English
Pages (from-to)	668-681
Number of pages	23
Journal	Critical Perspectives on Accounting
Volume	22
Issue number	7
Early online date	12 Sept 2011
DOIs	https://doi.org/10.1016/j.cpa.2011.01.010
Publication status	Published - Oct 2011

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10.1016/j.cpa.2011.01.010

http://www.sciencedirect.com/science/article/pii/S1045235411000335

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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.",

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

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