The Influence Of Local Government Debt Governance On Corporate Financing Constraints

In our government’s policies to deal with the economic downturn crisis,some measures have inevitably resulted in the formation of a large number of local government debts while ensuring stable economic growth.Excessive local debt will pose a threat to the stable operation of my country’s macro economy and create hidden risks.In order to strengthen the governance of local debts and eliminate the risks caused by excessive local debts,the State Council promulgated the Opinions of the State Council on Strengthening the Management of Local Government Debts(Document No.43)in 2014,which strictly restricted the borrowing of local governments,implemented scale control and budget management,and required local governments to speed up Establish a standardized debt financing mechanism.This document has played a strong role in restricting the issuance of local government bonds.Chinese enterprises are generally faced with financing constraints.The development of local debt will form a competitive relationship with corporate financing.Excessive local debt will crowd out the financing of enterprises and individuals,aggravate the degree of financing constraints of enterprises,and have a negative impact on local debt.Governance effectively controls the scale of local debts,reduces the level of competition between government financing and corporate financing,and alleviates corporate financing constraints to a certain extent.In order to explore the relationship between local government debt governance and corporate financing,this paper analyzes it from two aspects:theoretical analysis and empirical research.This paper firstly analyzes the reasons for the formation of corporate financing constraints and the possible impact of local government debt on corporate financing from the perspective of credit discrimination theory and crowding out effect by sorting out the existing literature.Secondly,it sorts out the development history and development status of my country’s local debt,as well as the current status of corporate financing in my country.Then,on the basis of theoretical analysis,this paper conducts an empirical study,taking the policy shock promulgated by the 2014 document No.43 as a quasi-natural experiment,and taking A-share listed companies as the research object,constructs a generalized DID model,and studies the governance of local government debt.Then,this effect is further analyzed.First,based on the characteristics of the enterprise itself,the heterogeneity analysis is carried out from three aspects:the nature of property rights,the scale of the enterprise and the proportion of enterprise debt.Heterogeneity analysis was carried out in three aspects,including the level of industrialization and the relationship between the market and the government,and then the mediation effect was tested with financing cost as the mediating variable.In the last part of the article,feasible policy recommendations are put forward based on the conclusions drawn from the empirical research.The empirical results of this paper show that local government debt governance has a significant effect on alleviating corporate financing constraints,and there is heterogeneity among different enterprises.In terms of their own characteristics,enterprises are small in scale,low in debt ratio,and non-state-owned property rights.In terms of market characteristics,in areas with a high degree of marketization,a high level of rule of law,and a weak relationship between the government and the market,companies are more affected by financing constraints.The main reasons for the difference are that banks and other credit institutions discriminate against enterprises,and the government interferes with the market allocation of financial resources.In the test of the intermediary effect,it is found that local debt governance will affect the financing constraints through the transmission channel that affects the financing cost.On the basis of the above conclusions,this paper puts forward the following policy recommendations.The government should be committed to improving the market environment,formulate policies according to local conditions,and continue to reasonably control the level of local government debt.Enterprises should also strengthen bank-enterprise cooperation and improve their own financing capabilities.