| The establishment of local government bond market takes an extremely significant and far-reaching meaning on strengthening local government debt management and deepening fiscal and tax system reform.On the one hand,the establishment of the local government bond market would improve the level of standardization and marketization of local government debt financing.Opening the "front door" of local government debt financing,and sealing the "back door" of local government borrowing through financing platforms or providing guarantees,the momentum of local governments’ excessive and illegal borrowing can be curbed radically,making local government debt management clearer and more transparent.On the other hand,the establishment and development of the local government bond market would lay the foundation of the coordination of financial relations between the central and local governments,the reform of the budget system,the improvement of the local tax system,and other details of the reform of financial and taxation system.But since the listing of local government bonds in 2015,investors have criticized the low interest rates and poor liquidity of local government bond.The government’s intervention in the pricing of bond issuance is a major reason for this phenomenon.In order to save financing costs,local governments use non-market-based means to decrease the interest rates for the issuance of local government bonds,resulting in the issuance price of local government bonds in the primary market being higher than that of the secondary market.Underwriters’ reluctance to take losses from selling local government bonds at low prices in the secondary market led to further deterioration of local government bond liquidity,which pushed up the liquidity premium of local government bonds and was not conducive to preventing and defusing systemic financial risks.In recent years,the government’s intervention in the pricing of local government bonds and the impact of local government bond liquidity on the yield have attracted the attention of many domestic and foreign scholars,and have achieved fruitful research results.However,there are still some shortcomings in the existing literature research.First,there is a lack of theoretical research on the incentive mechanism for local governments and underwriters to intervene in issuance pricing.Secondly,there is a lack of empirical research results on the impact of government intervention on the premium of special bond issuance.Thirdly,there is still a gap in domestic research on how government intervention affects the liquidity premium of local government bonds.Based on the above background,this paper focuses on the impact of government intervention on local government bond issuance premium and liquidity premium.Firstly,this paper combs the development history,operating status and bond issuing,trading and regulatory system of the local government bond market of China and the United States respectively,and points out the similarities and differences in the market system.This paper reckons that the reform of local government debt management has achieved positive results that deserve recognition and praise.However,there are still some deficiencies in the calculation of the issuance limit,trading methods,the acquisition of transaction information,the quality of the issuer’s financial report,market information disclosure and transparency.Secondly,the theoretical research part of this paper establishes the theoretical model of local government intervention in the pricing of bond issuance.This paper analyzes the internal logic behind the local government blocking the process of market issuance of bonds,the optimal decision of underwriters under government intervention,and the conduction path of government intervention to push up the liquidity premium in the secondary market.Finally,the empirical research section uses a series of pilot policies on the innovation of local government revenue bonds implemented by the Ministry of Finance in 2017 as a quasi-natural experiment to reduce the degree of government intervention,using the data on the issuance of local government bonds in China and the daily trading settlement data.The influence of government intervention on issuing premium and liquidity premium was tested by the method of Propensity Score Matching and two-stage least squares method respectively.The research results show that reducing the degree of government intervention and improving the accuracy of information on revenue bonds increased the issuance premium of revenue bonds by about 11 basis points,and the liquidity premium decreased by about 4.6 basis points.After endogenetic treatment and robustness testing,the above regression results are still valid.The research results of this paper are of theoretical and practical significance for improving the liquidity of local government bonds,improving the system of local government bond market,and preventing and defusing systemic financial risks.On the basis of the above research results,this paper puts forward the following two policy suggestions: First,in the short term,we should adopt policies aimed at improving the liquidity level and the marketization level of local government bonds.This includes encouraging commercial banks to conduct counter operations for local government bonds,setting up more convenient and fast information disclosure platforms,pushing forward pilot innovation policies for revenue bonds,and stepping up the handling of illegal local government intervention in the pricing of bond issuance.The purpose is to boost market confidence,to reduce the spreads in the primary and secondary markets of local government bonds,and to strengthen market restraint.Second,we will study and implement a series of policy to improve the governance of local governments in the long term,including establishing a government balance sheet disclosure system and a system for evaluating the performance of local government bond financing funds,reforming the local government bond credit rating system,and improving the local tax system.The aim is to correct the perverse incentives for local governments to borrow too much and to strengthen their internal controls on debt management.The innovation of this paper are as follows.First,from the theoretical point of view,this paper explains the incentive of local government to intervene in the pricing of bond issuance,the optimal decision of underwriters,and further improves the internal reason analysis of the poor liquidity in the local government bond market in China based on the research results.Second,for the first time,the revenue bond innovation pilot policy was used as a quasi-natural experiment to reduce the degree of government intervention,to test the role of government intervention in the pricing of local government bond issuance,and to analyze the policy effectiveness of the revenue bond innovation pilot for local governments.Enriching the empirical evidence of the application of incomplete information theory in the capital market,and at the same time complement and improve the research results of the analysis of the influence factors of the local government bond issuance rate.Third,this paper analyzes the impact of government intervention on the liquidity premium of local government bonds from the empirical point of view,and fills the gap in domestic research on this issue. |
