Details

Autor(en) / Beteiligte

• Wang, Lei
• Sha, Yifan
• Ding, Lili
• Zhao, Zhongchao

Titel

Risk mitigation strategies in urban investment bonds: Insights from local government implicit debt governance

Ist Teil von

• Structural change and economic dynamics, 2024-09, Vol.70, p.607-618

Ort / Verlag

Elsevier B.V

Erscheinungsjahr

2024

Quelle

Access via ScienceDirect (Elsevier)

Beschreibungen/Notizen

• •Provides a new framework for analyzing UIB credit risk by emphasizing the role of local government implicit debt governance.•Explores the moderating effect of financial technology development on the effectiveness of debt governance.•Examines the specific mechanisms (asset extension and risk warranty) through which debt governance influences UIB credit risk.•Compares the effectiveness of the 2018 and 2014 local government debt governance policies. Growing concerns surrounding urban investment bond (UIB) defaults in China necessitate a thorough examination of risk mitigation strategies. This study investigates the impact of local government implicit debt governance on UIB credit risk using a propensity score matching difference-in-differences (PSM-DID) approach. Our findings reveal that effective debt governance significantly reduces UIB credit risk, particularly for bonds issued by local government financing vehicles (LGFVs) with “high bargaining power”. However, financial technology development may obscure credit risks and dampen the positive effects of governance. Further analysis, grounded in the “financial potential energy” framework, highlights the mediating roles of asset extension and risk warranty. Comparing the 2014 "Document No. 43" with the 2018 debt governance policy, we find the latter to be more effective in mitigating UIB credit risk. This study offers valuable insights into the micro-level effects of local government debt governance and provides guidance for policymakers in managing credit risks.