Has Local Government Debt Management Reduced Private Enterprises’ Debt Financing Costs?

Debt financing is an important way for enterprises to obtain funds,and the cost of financing is an important factor that cannot be ignored in the process of enterprise development.However,Chinese private enterprises have long been facing the problem of difficult and expensive financing.Research shows that local government debt is one of the factors influencing enterprise debt financing.After the financial crisis in 2008,the Chinese government launched a series of proactive fiscal policies to cope with the downward pressure of the economy,which ensured stable economic growth,but also stimulated the rapid expansion of local government debt.Local government debt partly crowded out the financial resources of private enterprises,pushing up the cost of corporate debt financing.Private enterprises are an important part of China’s economic development.Since 2014,our government has launched a series of policies to manage the risk of local government debt.Among them,the “No.50” document jointly issued by six ministries in 2017 regulates and rectifies the irregular financing guarantee behavior of local governments in six aspects,which has played a positive role in curbing the expansion of local government debt and easing the financing constraints of private enterprises.In order to study the relationship between local government debt governance and private enterprises’ debt financing costs,this paper selected the data of provincial local governments and A-share private listed companies from 2014-2021 to conduct an empirical study.The study shows that local government debt has a significant positive impact on the debt financing cost of private enterprises.On this basis,this paper further investigates the effect of the “No.50” policy of local government debt management on the financing cost of private enterprises.The results of the study found that the implementation of local government debt governance policy has a positive effect on reducing the cost of debt financing for enterprises.Based on the results,puts forward four policy recommendations: control the expansion rate of local government debt scale and reasonably control the scale of debt raising;optimize financing policies and reduce the obstacles to private enterprise financing;make hidden debt visible and accelerate the promotion of financing platform transformation;distinguish regional differences and apply policies according to local conditions..