The notations and explanations.

This study investigates the impact of various financial arrangements on the investment behavior of the private firm in PPP (Public-Private Partnership) projects. The results manifest that: first, the private firm will invest in the project earlier under long-term debt financing than under short-term debt financing or all equity financing; second, the investment boundary of the private sector decreasing with the probability of obtaining long-term debt financing under short-term debt financing, while increasing with the probability of obtaining long-term debt financing under long-term debt financing; third, the optimal debt level under short-term debt financing displays a U-shaped relationship with the refinancing risk probability; fourth, under short-term debt financing, the difference in the optimal capital structure between projects with different volatility of cash flow is larger when the refinancing risk probability is lower; and fifth, the private firm may exit the project earlier under short-term debt financing than under long-term debt financing. These results can help us to understand the investment behavior of the private firm under different financial arrangements.