New Mechanism of Debt Growth of Local Government Financing Vehicles:The Perspective of Guarantee Network
China's local government debt management has become increasingly standardized,and local government financing vehicles(LGFVs)have been subject to stronger and tougher institutional rules and policy constraints from both the fiscal and financial sides to maintain debt turnover.Against this backdrop,the debt of LGFVs continues to grow,and identifying its underlying reasons will help to effectively prevent and resolve local debt risks.Studies have analyzed the causes of LGFVs'debt from the perspectives of the fiscal system,the financial system,and the credit support of local governments,but there is little literature exploring why LGFVs'debt can continue to grow despite increasing institutional constraints from the perspective of market players.Based on the guarantee data collected and organized manually,this paper constructs the guarantee network of LGFVs from 2009 to 2019 from the novel perspective of the guarantee network with the help of the network analysis method,and investigates the impact of the guarantee network on the debt growth of LGFVs and the underlying mechanism.The main findings are as follows.First,the integration of LGFVs into the guarantee network,as well as the increase in the importance of the position of LGFVs in the guarantee network,is significantly and positively associated with their debt size.The above new mechanism passes a series of robustness tests.Second,the above effects are more pronounced for LGFVs with high credit ratings or insufficient self-guarantees.Meanwhile,the debt growth effect of the guarantee network is more prominent for non-standard debt of LGFVs and has been more significant since 2015.Third,the LGFVs'guarantee network generates debt growth effects through four mechanisms:expanding information sharing,strengthening risk constraints,leveraging reputational incentives,and embedding implicit guarantees.The marginal contributions of this paper are as follows.Firstly,this paper verifies that the complex network of guarantee relationships is an important reason for the sustained growth of LGFVs'debt.The existing literature mainly discusses the formation mechanism of LGFVs'debt from the perspectives of fiscal and financial systems or development pressure,and there are fewer studies on the role played by the guarantee of LGFVs and other activities of market players in debt growth.Taking the guarantee network constructed among LGFVs as the research object,this paper examines the new mechanism of LGFVs'debt growth,which is a useful supplement to the research on the causes of local public debt growth.Secondly,this paper provides basic data and analytical methods for the academic community to conduct in-depth research on the economic and social effects of the guarantee network of LGFVs and the dynamic mechanism of network evolution.As the guarantee data at the enterprise level need to be collected and organized manually,most of the literature takes listed companies or banks as the research object due to the easier access to their data,and there is a lack of research on the guarantee information of LGFVs.This paper manually organizes the guarantee data of LGFVs from 2009 to 2019,and then utilizes the"pseudo network"-based instrumental variable estimation and other econometric methods to overcome the possible interference of endogeneity problems on the empirical results.Thirdly,this paper provides empirical evidence for understanding how a complex network of social relationships such as guarantee relationships acts on LGFVs'debt.It tests the mechanisms by which the guarantee network acts on the debt growth of LGFVs at both general and specific levels.From a general perspective,the paper verifies that the guarantee network influences the debt growth of LGFVs by means of three types of mechanisms common to social networks(information sharing,risk constraints and reputational incentives);from a specific perspective,given that LGFVs have not yet completely divested themselves of their government financing functions,the paper verifies that implicit guarantees also serve as a channel through which the guarantee network generates debt growth effects.
万方数据
维普
