| Local government bonds in China are inferior to national bonds in terms of credit risk and liquidity,and their issuing interest rate should be higher than that of national bonds in the same period.However,in practice,there is a phenomenon that the issuing interest rate of local government bonds is significantly lower than that of national bonds.As an important pricing benchmark in the financial market,the local government bonds should be priced in a market-oriented way,but in practice,it shows a non market-oriented way,which is not conducive to the improvement of the pricing mechanism in China’s financial market in the long run.In addition,local government bonds are closely related to budget management and financial risks.A reasonable understanding of the causes of the interest rate anomalies of local government bonds is conducive to the central government to formulate a more effective local debt management system to prevent and control local financial risks and consolidate the micro foundation of local government bonds marketization from the perspective of financial management.The micro phenomenon of issuing interest rate anomalies of local government bonds in China is also a mirror of many problems in the economic system.By opening the "black box" of its micro mechanism,it is helpful to further understand the importance of linkage reform by clarifying and displaying the internal relationship between the micro phenomena in the financial field and the economic system.In general,this paper attempts to provide academic support for improving the market-oriented level of local government bonds issuance in China,and mainly includes the following three core parts:(1)Based on the fact that the factor market has not yet fully realized marketization and local governments have the ability to intervene in bank decision making,in addition,the motives of local governments are not verifiable,this paper defines the local government bonds transaction in China as "tying contract with administrative intervention",and explains the formation mechanism of local government bonds issuing interest rate anomalies.Furthermore,we use 3824 local government bonds issuance data from 2015 to 2018 to test the theoretical hypothesis and draw the following conclusions: First,under the influence of economic reciprocity mechanism,the more economic resource the local government controls,the more obvious the anomaly of local government bonds issuing interest rate is.Second,under the influence of administrative intervention mechanism,the stronger intervention ability of the local government is,the more distorted the income distribution proportion of the economic reciprocal tying contract is.And fiscal pressure of local government can promote the effect of administrative intervention.Third,the effectiveness of administrative intervention mechanism decreases with the increase of institutional quality.This paper is helpful to clarify the formation mechanism of "deviation" of local government bonds issuing interest rate in China,and provide enlightenment for the improvement of financial marketization level.(2)Based on the analysis paradigm of tying contract,this paper explains the impact of information disclosure on the economic reciprocity and administrative intervention effect that lead to the "anomaly" of interest rate of local government bonds issuance in China.According to the theory of information asymmetry,more sufficient information disclosure helps to reduce the degree of information asymmetry of contract participants.On the one hand,it improves the bank’s valuation of local debts,thus enhancing the bargaining power of local governments in tie-in contracts,promoting the effect of economic reciprocity;on the other hand,it increases the transaction cost of local governments’ administrative intervention and weakens the effect of administrative intervention.In addition,using the samples of local government special bonds in our country for empirical test,the research shows that improving the information disclosure degree of local government bonds can only reduce the effect of administrative intervention of local governments,but it can not alleviate the economic reciprocity effect of local governments to reduce the issuing interest rate of local government bonds through the implementation of tying contracts because the factor market in our country has not fully realized the marketization On the whole,the market-oriented pricing level of local government bonds has been improved.It is suggested that the relevant departments should further strengthen the market-oriented reform and construction of the factor market,so as to fundamentally improve the independence of the pricing of local government bonds and realize the real sense of marketization.(3)In 2015,China started a three-year debt replacement work for local governments,issuing local debts to borrow new ones and repay old ones to relieve local financial pressure.For the purpose of replacement,local government bonds mainly include public issuance and directional underwriting.Compared with the public issuance,the issuing interest rate of the local government replacement bonds is relatively high,and the "issue interest rate anomaly" is significantly improved.Therefore,this paper uses the tying contract paradigm to explain from two perspectives of economic reciprocity and administrative intervention.Based on the sample of local government replacement bonds issued in 2015-2018,the theoretical hypothesis is verified by empirical analysis.The results show that: first,the effect of economic reciprocity is affected by the way of issuance.Directional issuance alleviates the inhibition of economic reciprocity on the interest rate of local government bonds issuance,while public issuance promotes the inhibition of economic reciprocity on the interest rate of local government bonds issuance.Second,the effect of administrative intervention is affected by the way of issuance.Directional issuance alleviates the inhibition of administrative intervention on the interest rate of local government bonds issuance,while public issuance promotes the inhibition of administrative intervention on the interest rate of local government bonds issuance.This paper can provide empirical support for the policy effectiveness of carrying out targeted issuance to replace local government debt.The research of this paper has some policy implications:(1)The issuing interest rate anomalies of local government bonds in China have certain historical rationality.The direct reason is that the price of local economic resource such as government deposits has been regulated.In order to obtain their "deserved" share,the local government will get the benefit by bundling the economic resource and the local government bonds.On the surface,the issuing interest rate anomalies come from the lack of marketization of the local government bonds issuance market,but in fact,it reflects the problems of low marketization of factor market and imperfect business environment.In order to correct the abnormal interest rate of local government bonds,the central government should not only start from the aspect of local government bonds,but also solve the problem of the direct control scope and pricing of some important elements of local governments,continuously promote the reform of factor market and improve the level of factor marketization.On the premise of reasonably defining the boundary of government management,the central government should guarantee the income share of local government in the factor market and create conditions for canceling the direct intervention measures of setting interest rate plus.(2)The central government should constantly improve the policies and regulations related to the information disclosure of local government bonds,improve the information disclosure degree of the corresponding financing projects of local debts,and reduce the space for reciprocity and administrative intervention between local governments and institutional investors.It is suggested to further increase the support for the issuance of local government project income special bonds with higher degree of information disclosure,so as to appropriately expand the issuance field of local government project income special bonds.At the same time,it is still necessary to improve the quality of information disclosure,especially the prediction of project cash flow,the matching degree of funds and projects,and the efficiency of fund use,so as to improve the debt management ability of local governments and reduce the risk of local government debt.(3)The issuing interest rate of the local government replacement bonds is relatively higher,but to some extent it reduces the transaction cost of the contract participants and the effect of administrative intervention on lowering the issuing interest rate of the local government bonds.In the future,the local government existing debts can still be replaced by directional underwriting. |
