Implicit Government Guarantee,Credit Rating And Bond Pricing

With China entering a new stage of urbanization,local financing platform not only solves the fund gap and promotes municipal construction,but also leads to the rapid expansion of local government debt,which seriously affects the sustainable development of the economy.Regulators frequently promulgate relevant policies to make the government implicit guarantee behind the local government financing platform bonds explicit,break the expectation of rigid payment,and form a reasonable risk pricing mechanism.Although some literatures have done some researches on the cost effect of government implicit guarantee on debt financing,the cost effect of credit rating on debt financing and local government debt,they have not reached a consistent conclusion and most of the studies have not considered the endogenous problem of credit rating and bond issuance price.Therefore,the thesis takes the local financing platform bonds as the research sample,and uses the method of combining theory with empirical research to explore the impact of government implicit guarantee and credit rating on bond issuance pricing.Empirical studies show that there are implicit guarantees of local government financing platform bonds that are identified and priced by the market.The degree of development of regional economy will affect the debt financing cost effect of government implicit guarantee.And for the economically developed regions,government implicit guarantee can reduce the cost of bond issuance.What's more,credit rating can reveal credit risk,and debt financing cost effect of debt rating is more obvious than that of main body rating.In order to prevent and resolve the local government debt risk,we need to strengthen debt screening,eliminate the implicit guarantee of the government,.At the same time,we need the financing platform company to make clear its strategic positioning.Besides we also need to improve the debt default mechanism and credit rating system.