Is the Nexus of Corporate and Public Financial Management Institutionalized in Special Purpose Entities?

Abstract

A novel integration of public and corporate financial theory is used to model capital structure in special purpose organizations. The expectation is that considering the similarities to corporate structure and managerial objectives these organizations will display evidence of an intergovernmental modified pecking order approach to capital structure. The censored probit method suggests that special purpose entities follow an intergovernmental modified pecking order of capital structure, with correct classification in excess of eighty-nine percent. The results support a direct link between intergovernmental revenue and the capital structure of the organization, providing insight into the tie between managerial costs and benefits.