Research On The Relationship Between Credit Rating And Guarantee Mechanism And Financing Cost Of City Investment

The city investment debt is a bond issued by the financing platform of the local government departments and its subordinate organizations.It is a special financing tool which is produced in the process of the development of the socialist market economy in our country and is constantly improved in the process of urbanization.The funds raised are basically used in the construction of public infrastructure,and the output of urban investment debt is a typical urban public product,which plays an important role in the development of market economy and the construction of socialist modernization in China.In the more than two decades since the city's debt came into existence,it has raised money to make up some of the funding gaps created by local governments in the construction of urban infrastructure.However,as the size of the bond issue continues to expand,the financing cost of the city investment and financing platform is also gradually exposed.Since 2014,the interest rate on the issuance of city investment bonds has been gradually rising,for example,the "13 Magi Lake High-Tech debt 02" issued in January 2014.The bond was issued on a scale of 700 million yuan,and the final coupon rate was set to be the upper limit of the bookkeeping range,reaching 9.30%.Since then,the interest rate in the first-tier market for CityInvestment bonds has continued to rise.However,most of the infrastructure projects invested by CITCs do not have significant and direct economic benefits.It is difficult to repay the principal and interest only by relying on the income of the project itself.The increase in financing costs will put CICC under great pressure to repay debt in the coming years.Credit rating and guarantee mechanism can help issuers to alleviate the problem of information asymmetry in the process of bond financing and reduce the financing cost of bonds.It is an important infrastructure to make the bond market run smoothly.Firstly,this paper theoretically analyzes the mechanism of credit rating and guarantee mechanism influencing bond financing cost,and takes the data of city investment bond issued in the first half of 2010-2017 as a sample,using regression analysis and other methods to discuss the level of credit rating.The relationship between the different rating methods,the guarantee,the different guarantee methods and the location of the city bond financing cost.The results show that,first,the higher the credit rating,the lower the financing cost of the city debt,and the greater the effect of the debt rating on reducing the financing cost compared with the main rating;second,from the perspective of the guarantee mechanism,The lower financing cost of guaranteed city debt suggests that the information asymmetry between theguaranteed city bond issuer and the investors is lower and investors demand less risk compensation than the unsecured city debt.For the guaranteed city bond,the financing cost of the city investment bond guaranteed by the third party is lower than that of the mortgage guarantee,and there is no significant difference between the central and western cities and the eastern city investment bond in the issue interest rate.Shows that the market believes that the city investment debt behind the existence of implicit government guarantees.The conclusion of this paper shows that credit rating and guarantee mechanism are helpful to alleviate the adverse selection and moral hazard in the process of issuing city investment debt.This has certain enlightenment significance for perfecting the issuance and repayment mechanism of the city investment debt and helping the city investment enterprises out of the financing predicament.