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

IF 5 2区经济学 Q1 ECONOMICS

Structural Change and Economic Dynamics Pub Date : 2024-05-21 DOI:10.1016/j.strueco.2024.05.015

Lei Wang , Yifan Sha , Lili Ding , Zhongchao Zhao

{"title":"Risk mitigation strategies in urban investment bonds: Insights from local government implicit debt governance","authors":"Lei Wang , Yifan Sha , Lili Ding , Zhongchao Zhao","doi":"10.1016/j.strueco.2024.05.015","DOIUrl":null,"url":null,"abstract":"<div><p>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.</p></div>","PeriodicalId":47829,"journal":{"name":"Structural Change and Economic Dynamics","volume":"70 ","pages":"Pages 607-618"},"PeriodicalIF":5.0000,"publicationDate":"2024-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Structural Change and Economic Dynamics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0954349X24000766","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}

引用次数: 0

Abstract

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.

查看原文本刊更多论文

城市投资债券的风险缓解策略：地方政府隐性债务治理的启示

中国城投债违约问题日益受到关注，因此有必要对风险缓解策略进行深入研究。本研究采用倾向得分匹配差分法（PSM-DID）研究了地方政府隐性债务治理对城投债信用风险的影响。我们的研究结果表明，有效的债务治理能大大降低 UIB 的信用风险，尤其是由 "高议价能力 "的地方政府融资工具（LGFV）发行的债券。然而，金融技术的发展可能会掩盖信贷风险，削弱治理的积极作用。基于 "金融势能 "框架的进一步分析强调了资产扩展和风险担保的中介作用。对比 2014 年的 "43 号文件 "和 2018 年的债务治理政策，我们发现后者在缓解 UIB 信贷风险方面更为有效。本研究为地方政府债务治理的微观效应提供了有价值的见解，为政策制定者管理信贷风险提供了指导。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Structural Change and Economic Dynamics ECONOMICS-

CiteScore

9.60

自引率

4.90%

发文量

159

期刊介绍： Structural Change and Economic Dynamics publishes articles about theoretical, applied and methodological aspects of structural change in economic systems. The journal publishes work analysing dynamics and structural breaks in economic, technological, behavioural and institutional patterns.