Fiscal Transparency, Credit Rating And Local Government Bond Financing Costs

After the implementation of the new Budget Law in 2015,local government bonds became the main channel for direct financing of local governments in China.The fundamental purpose of allowing local governments to issue bonds is to standardize the financing behavior of local governments and establish market-based local government financing mechanisms.With the continuous expansion of the scale of local government bond issuance,its financing costs will have a huge impact on local government finances.Information disclosure and credit rating are the basic elements of the bond market.Studies have shown that foreign government bonds are highly market-oriented,and fiscal transparency and credit ratings can significantly affect government bond financing costs.At present,China's local government has a low level of information disclosure and lacks a unified and standardized credit rating.Then,in China's local government bond market,will financial transparency and credit rating affect the local government bond financing costs? What if there is a path that affects its impact? Due to the short issuance time of local government bonds in China,there is no empirical study of the above three relationships.In view of this,based on the hypothesis of "economic man",risk-equilibrium theory,information asymmetry theory,and signal transmission theory,the paper conducts empirical tests based on the full sample of local government bonds issued in 2011-2017 in China.The results show that: The improvement of fiscal transparency can significantly reduce the cost of local government bond financing.After introducing credit rating factors,we finds that it plays an intermediary role in the process of fiscal transparency affecting the financing costs of local government bonds.The study of the dissertation finds that the mechanism of fiscal transparency and credit rating affect the financing costs of local government bonds,deepens the understanding of the local government bond market,and has a reference value for local governments to reduce financing costs.Based on this,this paper puts forward the following recommendations:(1)vlocal governments should further improve fiscal transparency to reduce their bond financing costs.(2)establish and improve the local government credit rating system and increase the credibility of local governments.(3)improve the credit rating system for local government bonds and improve the credit rating method.