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A Production Function-Based Financial Feasibility Model (PFFM) and Social Return Assessment of Public Electric Bus Investment: Evidence from Thailand

Year: 2026

Type: article

Abstract: Most public investment feasibility studies rely on the linear assumption model (LAM), which assumes constant growth in revenues and costs and may overlook the underlying production structure. This study develops a Production Function-Based Financial Feasibility Model (PFFM) by integrating a Cobb–Douglas production function into cash flow analysis. It also applies the model to a 15-year electric bus project operated by the Khon Kaen Provincial Administrative Organization, covering three routes and a total investment of THB 285.05 million. The analysis uses deterministic projections based on expert-validated growth assumptions. Ordinary least squares estimation yields an energy elasticity of 0.990; however, because energy consumption is derived from a fixed rate per kilometre, this coefficient primarily reflects the internal consistency of the projections rather than an independently estimated behavioural relationship. Returns to scale are statistically indistinguishable from unity (RTS = 1.006; p = 0.95). Based solely on farebox and advertising revenues, both the LAM and PFFM indicate that the project is financially infeasible, with base-case NPVs of −THB 271.74 million and −THB 271.61 million, respectively, B/C ratios of approximately 0.54, and unattainable IRRs. This conclusion remains unchanged under a 30% increase in electricity prices. Although the two models produce similar results because RTS is close to unity, the PFFM provides a more transparent decomposition of fixed and marginal costs and clearer diagnostic insights into production technology and cost risk. In addition, an SROI analysis covering environmental, health, safety, and time-saving benefits, together with net-impact adjustments, yields a ratio of 3.45, indicating that the project generates substantial social value despite its financial infeasibility. The proposed framework therefore provides public agencies with a more comprehensive basis for investment decisions, subsidy design, and public service obligation policies.

Source: Journal of risk and financial management

DOI: 10.3390/jrfm19080560

Authors: Thirawat Chantuk, Pornthip Jatupornmongkolchai, Wiwatwong Bunnun

Institutions: Silpakorn University, Rajamangala University of Technology Rattanakosin, Khon Kaen University

Language: English

Topic: Capital Investment and Risk Analysis

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Affordable and clean energy, Sustainable cities and communities, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $1,689