Participation of City Commercial Banks,Local Government Bailouts,and Mitigation of Default Risk in Municipal Investment Bonds
Support from local governments is crucial for reducing the default risk associated with municipal investment bonds.Utilizing data from municipal investment bonds in prefecture-level cities from 2015 to 2021,this study employed ordinary least squares(OLS)estimation and instrumental variable methods to analyze the impact of city commercial bank resources on the credit spreads of municipal investment bonds.The main regression results indicate that regional fi-nancial resources and the local government's disposable financial resources significantly reduce the default risk of local municipal investment bonds.Heterogeneity analysis reveals that the effect of city commercial banks in reducing default risk is only present in economically developed areas and regions in which these banks are financially robust.The mechanism analysis demonstrates that the first substantial default of a municipal investment bond enhances the effect of city com-mercial bank resources on reducing credit spreads.The structure of financial resources shows a"localized"tendency,presenting an"inverted U-shaped"relationship with credit spreads,and city commercial bank resources exhibit dual financial and fiscal characteristics in reducing munic-ipal investment risk.Based on these findings,it is recommended to focus on the development of regional city commercial banks and enhance local governments'emergency bailout capabilities to prevent the escalation of implicit debt default risks from isolated incidents to broader crises.
credit spreaddefault riskfinancial resourceslocal government bailoutsmunici-pal investment bonds
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NSTL
万方数据
