A theory of joint venture partnership in property investment : with special application to the profit sharing arrangements for property development in Hong Kong and the People's Republic of China
This study derives a theory explaining the underlying principles of the profit sharing arrangements employed by joint venture partnerships for property development projects.
Using standard economic analysis and by distinguishing private and non-private properties, three hypotheses are derived from the theory. They are namely the Hypothesis of Resource Inputs Agreement, the Hypothesis of Proportionate Shares and the Hypothesis of Land Value Dissipation.
Firstly, the Hypothesis of Resource Inputs Agreement conjectures that the contracting parties of a joint venture partnership must agree upon the resources to be input by either party, in order that any profit sharing arrangement could be agreed upon; secondly, the Hypothesis of Proportionate Shares proposes that for a private/private joint venture, the ratio of the value of the resources input by either party equals the corresponding ratio of the outputs apportioned by him; and finally, the Hypothesis of Land Value Dissipation derives that in a private/non-private joint venture where the land input is a non-private
property, and provided that the market value of land is not agreed upon in the joint venture contract, the ratio of the share of outputs apportioned by the non-private land owner, tends to be smaller than the corresponding share of the input land resource, valued in accordance with the respective market conditions.
These hypotheses are tested against empirical the shareholding arrangement in general; and against empirical findings from joint development projects in particular: four of these projects are located in Hong Kong (two are private/private joint ventures and two are private/non-private ones), while four other projects are private/non-private joint ventures in China. All of the observations from these projects are found to be consistent with the theory. The results are then summarised and the theoretical implications of the empirical observations are discussed in terms of the constraints of property rights and transaction costs.
School:The University of Hong Kong
School Location:China - Hong Kong SAR
Source Type:Master's Thesis
Keywords:real estate investment china hong kong case studies joint ventures
Date of Publication:01/01/1992