How Does Local Government Leverage Affect Corporate Leverage

At present,China's economy has entered a period of new and old kinetic energy conversion and structural transformation,and high-quality economic development has become the main theme.At the same time,the problems of overburdened debts and high leverage in China's various economic sectors have become increasingly serious,causing the concern of government regulators.From the perspective of stabilizing growth and preventing risks,this article focuses on the correlation between local government leverage and corporate leverage.The article builds a balanced panel based on the total debt data of industrial enterprises and local governments from 2001 to 2013.The model analyzes the connection between the two leverage.This article first introduces the research background and significance,at the same time sorts out important documents related to corporate leverage and government leverage,and elaborates and identifies important concepts.Through empirical research in this paper,we find that: first,local government leverage does have an effect on corporate leverage and this effect is the "crowding effect".Secondly,the leverage effect of local government leverage on non-state-owned enterprises,enterprises in the underdeveloped western regions,and small and medium-sized enterprises is even greater.Finally,through the inspection of the impact mechanism,it is found that the impact of government leverage on corporate leverage has two paths,namely,demand competition mechanism and price competition mechanism.From the perspective of demand competition mechanism,the effect of government leverage on the competition of funds for corporate leverage is generated through government investment constructive expenditure by Complete intermediary role;from the perspective of the price competition mechanism,the effect of government leverage on corporate leverage is partly achieved by raising the cost of borrowing corporate funds.The research results of the article provide evidence for the micro-effects of local government fiscal policy,and help the government to take into account the multi-sectoral leverage reduction options and achieve the dual goals of “de-leveraging” and “stable growth”.Improving corporate financing capabilities and injecting new vitality into economic development also have certain reference values.