Study on the credit risk of local government financing platform debt an empirical analysis based on interbank credit spreads
|School||Shanghai Academy of Social Sciences|
|Keywords||Local Government Financing Platform Bonds Quasi-municipal bonds Inter-bank Market Credit Risk Credit Spreads|
Since1994, China has entered the stage of fiscal decentralization reforms. During this period, the Budget Law of the PRC was enacted and included the provisions of section28that the local governments can not issue any municipal bonds. To develop local economics, local government established the local government platform companies also well know as the City Investment Co. Because of their implied credit guarantee of local government, the bonds of local government platform companies are often regarded as Quasi-municipal bonds. The volume of bonds rapid expansion in2012, while the macro-economic growth slowdown. More and more people has started thinking about the credit risk of credit bonds especially of the local government financing bonds, because there are more credit events has appeared. It’s more meaningful to research the credit risk of the bonds.The article is based on the basis of the research about municipal bonds and government financing platform bonds, and elaborates the existence of the credit risk. We demonstrate the applicability of the measure credit risk through the credit spreads in inter-bank market and judge on factors which may affect the credit spreads. And then we build multiple regression model on the factors and large sample to measure the credit risk of the bonds’.At last, we prove the local government financing platform bonds are quasi-municipal bonds through White heteroskedasticity robust inference. Especially, we got the conclusion that we could measure the credit risk through five factors including term, guarantees, the administrative level, asset and general budget revenue scale.