The Analysis Of Financial Leverage Effect Of Listed Financing Platform Of China Local Government

By the end of 2014, all levels of local government debt in China reached $23 trillion, according to the record of ministry of finance. This data had increased by 30 percents compared with the previous year. Among this, there is almost 7 trillion of the debt was through the channels of local government investment and financing platform company financing. This number accounts for nearly 40% of total local government debt. The rapid expansion and the concealment of the debt caused the debt risk of local governments.Before 2014, China’s old "budget law" provision of local government barred from issuing debt specifically. But local governments have to solve the contradiction of spending of public affairs increased gradually and their financial resources are relatively insufficient. Since 2008, they choose to set up local government investment and financing platform. Due to its unique concealment and regional differences, the financing platform had important impact on local government debt and government economic activity. Therefore, this article takes the national 18 listed company as the research objects. Use empirical analysis to learn the financial leverage coefficient of local government financing platform. So as to measure the current local government investment and the use of financial leverage for financing platform companies. Then provides relative Suggestions aims at how to make use of positive effectively as possible as they can and avoid the negative effects of financial leverage.This paper mainly studies from the following five aspects:First, this article’s research background, research purpose, research significance, research methods and related research status at our country as well as from abroad and so on.Second, the analysis of the basic theory of investment and financing of local government, including local government investment and financing definition of related concepts and theoretical basis for the debt forming of local government investment and financing platform.Third, the current situation analysis of local government investment and financing platform financial leverage, mainly according to calculate nearly six years of financial leverage coefficient of 18 listed local government investment and financing platforms. Then empirical analysis the possibility of risks and benefits of local government investment and financing platform companies faced. I continue to horizontal compare the different parts of the investment and financing platforms of the company’s financial leverage coefficient and longitudinal comparison each investment and financing platform companies nearly six years of financial leverage coefficient.Fourth, the financial leverage effect analysis of local government investment and financing platforms. This section mainly through calculating and comparing the nearly six years Earning Before Interest and Tax of the public investment and financing platforms so as to know exactly about the using of financial leverage effect in recent years. The purpose is to give full play to the effect of financial leverage is effective as far as possible and avoid the negative effects. This part choose one company of Anhui Province——the Hefei Urban Construction Company For depth analyzing.Fifth, this part would have a coefficient linear regression for the 2013 financial leverage through SPSS20.0 software and find out the significant factors for affecting the size of the financial leverage effect. The study found that EBIT Ratio, Asset-Liability Ratio, Total Assets Turnover Rate and Liability Interest Ratio has a significant impact on the financial leverage effect and analyzing each influence factor respectively.Finally, in view of the previous research and analysis on how to give full play to the investment and financing platform for the company’s financial leverage effect, this paper will puts forward relevant policy Suggestions in order to help the enterprises get the most profits and to avoid financial risk effectively.Through the research above, it can be seen that most of the current local government investment and financing platform for the company’s financial leverage is plays a positive effect. However, for a number of companies, enterprises had both positive effects and negative effects of the alternating in the process of development management. Therefore, for these companies, avoiding the negative effects in order to reduce the financial risk of the enterprise is particularly important.