Analysis of the Impact of Local Government Debt Scale on the Cost of Capital of Enterprises-Based on the Dual Case Study of Midea Group and TCL TECH
Local governments'promotion of large-scale infrastructure construction through debt financing has a facilitating effect on economic development,but the upgrading effect of the scale of local governments'debt on the cost of corporate capital should not be ignored.The"crowding out"effect of enterprise financing brought about by local government debt increases the cost of enterprise debt and equity,which has a"threshold effect"and shows obvious heterogeneity among enterprises of different natures.Both Midea Group and TCL TECH's data confirm this conclusion.In order to ensure the smooth operation of the economy and stimulate the vitality of market players,it is necessary to recognize the role of local government debt scale on the enhancement of the cost of capital of enterprises,and take a variety of measures to reduce the cost of capital of enterprises,strictly control the scale of local government liabilities,and expand the diversified channels of enterprise funds.
local government debt scalecapital costequity costdebt cost
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