Hidden Debt Risk Assessment Of Chinese Local Governments Based On KMV Model

With the rapid development of society and the increase in construction costs,it is difficult for local government revenue to meet the government's own financial needs for development.Therefore,local governments often use debt financing to obtain funds.Moderate local government debt guarantees the smooth flow of local government funds.The turnover has promoted regional economic development.However,excessive debt will trigger debt risk,induce debt crisis,and may even be transmitted to the financial market,triggering a financial crisis.In addition to bank loans,urban investment debt and non-bank financial institution financing(such as non-standard and lease)have become local government borrowing channels.Among them,some local governments took illegal measures such as promised repurchases,fixed returns,financial pockets and expanded government purchases when raising debts,resulting in the existence of a large number of local government implicit debts.After 2017,the central government began to correct the hidden debt violations of local governments,"opening the door and blocking the door",which had a deterrent effect on the growth of local government debt violations,and began to focus on reducing the risk of local government stock debt.Based on the current situation of the hidden debt of local governments in my country,this paper explores the hidden debt risks of local governments by combining theoretical analysis and KMV model analysis.The first part elaborates the background significance,thinking methods,difficulties and innovations of the topic selection,and summarizes the research status of local government debt and debt risk at home and abroad from the aspects of connotation,formation and classification of local government debt risk.The second part defines local government debt and local government debt risk and other related concepts,and introduces the formation mechanism of local government implicit debt and the theory of debt risk assessment and early warning in order to seek theoretical support for this article.The third part is to sort out the status quo of local government debt and the development process of hidden debt in China,and analyze the impact of local government debt risk in my country,aiming to thoroughly understand the pulse of hidden debt risk.The fourth part compares the three methods of implicit debt of local governments and selects the source of debt funds.From the four aspects of RMB loans,urban investment bonds,financial leasing and non-standard financing,the stock of implicit debt of local governments in 2018 The amount of hidden debt due and the debt service payment of hidden debt due are estimated.In the fifth part,Hongyuan's method is used to measure the solvency of local governments in provinces and cities from the perspective of flow and stock,and then based on the KMV model,the inter-provincial panel data from 2012 to 2017 is used Quantitative analysis of sexual debt risk to estimate the default distance and default probability of hidden debt of provincial and municipal local governments.According to the empirical results of this article,the total hidden debt of each province and city is relatively large,and the probability of default is generally small,but it still needs attention.Then put forward relevant policy recommendations to resolve the hidden debt risk of local governments.These include: sorting out various investment and financing methods;improving local government implicit debt management;optimizing regional industrial structure;and improving the operating efficiency of local state-owned enterprises.The research conclusion of this paper provides some reference for the hidden debt risk management of local governments,and has certain practical application value.