Capital Structure of Special-Purpose Entities

Abstract

A novel integration of public and corporate financial theory is used to model capital structure in governmental special purpose organizations. The expectation is that given observed similarities to corporate structure, including managerial objectives, these organizations will display evidence of an intergovernmental pecking order approach to capital structure. The censored probit method suggests that special purpose entities follow an intergovernmental 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 for these governmental organizations.