Local Government Financial Strength and Implicit Guarantees: A Textual Analysis Based on the Prospectuses of Urban Investment Bonds
DOI:
https://doi.org/10.64051/jhn.v1i3.61Keywords:
City Investment Bonds, Local Government Financial Resources, Implicit Guarantee, Text AnalysisAbstract
This study empirically examines the impact of local governments' financial strength on the textual information reflecting implicit guarantees in the prospectuses of urban investment bonds, using urban investment bonds issued between 2010 and 2022 as the research sample. The findings reveal that the stronger the financial strength of a local government, the more textual information reflecting government implicit guarantees appears in the prospectus of its urban investment bonds. However, this impact weakened significantly both after the issuance of the "Document No. 43" and the outbreak of the COVID-19 pandemic. Further research indicates that this impact is more pronounced in less developed regions such as the central and western parts of China, when local governments have greater fiscal autonomy, and when the fiscal transparency of local governments is relatively low. The conclusions of this study hold practical significance for exploring local government implicit guarantees from the qualitative perspective of textual descriptions and for formulating effective policies appropriately during the transitional stage of the development of the urban investment bond market.
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