Complex Network,Leverage Of Financing Vehicles And Credit Risk Spillover Of Quasi-Government Bonds

Since 2012,the issue of local government debt has been reinforced at two sessions(NPC&CPPCC).Quasi-municipal bonds make up an important part of implicit debt of local government,so it is critical to understand and control the default risk of city investment companies.Our research has revealed the strong positive correlation between the leverage ratio of these companies and their risk spread behavior.City investment companies with high leverage ratios are more likely to spread risk to others.Their risk spread ability is also influenced by The Budget Law and fiscal transparency of local governments.Furthermore,this paper goes beyond companies and studies the risk spread ability at city level.At city level,leverage ratio of companies no longer takes action,while government support shows significant effect.It shows that cities with companies that rely on government support are more likely to spread risk to others.We also find that the risk spread activity of cities drop significantly from The Budget Law.Furthermore,those cities with higher fiscal transparency enjoy larger drop in risk spread activity.