The Impact Of Government Implicit Guarantee On Interest Rate Of The Bonds Of The Local Financing Platforms

As an important part of the state-owned asset management system,the local financing platforms(LFPs)had played an important role in the financing of regional constructions.However,with the rapid expansion of the scale of the debts of LFPs,the implicit guarantee relationship between LFPs and local governments gives government heavy solvency pressure.Although the relevant laws and regulations have explicitly divested the guarantee relationship since 2014,investors still have the expectation of implicit guarantee of the bonds of LFPs,which makes the pricing of those bonds somewhat distorted.In order to explore the impact of government implicit guarantees on the interest rate of the bonds of LFP in the current market,this paper selects the corporate bond data since the government guarantee was regulated in October 2014.The empirical results show that the government implicit guarantee can significantly reduce the interest rates of the bond of LFPs;the implicit guarantee of the provincial-level platform is greater than that of the city-level or county-level platforms;Besides,the implicit variables can guide the change of explicit variables.In order to avoid the financing costs from rising after the implicit guarantee is expected to collapse,LFPs should make market-oriented transition and improve the company's internal governance capabilities.The innovativeness of this article is that we analyze of the explicit and implicit impact of the government on the interest rate.Besides,attention is paid to the differences in LFPs of different administrative levels...