The Peer Effect Of Local Government Financing Vehicles Investment In China

The rationality of investment decision of LGFVs plays an important role in restraining debt financing behavior and local debt expansion.Since developing under the background of financial pressure,promotion pressure and urban development pressure of local governments,LGFVs assume more government functions,resulting in serious phenomena of excessive investment,advanced investment and repeated investment.However,at present,scholars only place the investment research center of LGFVs in the traditional economic framework,without including the theoretical framework of behavioral economics.Specifically,at this stage,domestic scholars mainly place the research center in the policy background and debt financing of investment decisions of LGFVs.The research on the imitation and comparison of investment decisions among LGFVs,namely the peer effect,is basically blank.Therefore,how to identify the peer effect of Chinese LGFVs investment and the internal mechanism of its investment inefficiency has become an urgent problem in the field of finance and local government investment and financing.In terms of research ideas,this paper takes LGFVs as the research object for the first time to explore its investment decision system.And This paper divides peer companies by administrative division and geographical distance,so as to make its investment decision system more complete.In terms of research methods,this paper takes LGFVs from 2015 to 2020 as the research sample,mainly uses spatial econometric models(Spatial Dubin model and two-zone Spatial Dubin model)to verify the existence of peer effects,alleviates the problem of missing variables in the model.In addition,this paper defines same-group companies by setting the spatial weight matrix.It is more normative compared with the method of using the arithmetic mean value of other companies in the same group as the proxy variable of the peer effect.Moreover,maximum likelihood estimation(QML)method can effectively overcome the endogeneity problem of the traditional measurement model.The empirical results show that the investment behavior of the LGFVs has the peer effects.When the investment of the same group company increases,the company will also increase the investment by imitation.In addition,the larger the scale,the stronger the profitability,the higher the financing level and the higher the monetary capital holding,the larger the investment scale of the company.The investment peer effect of LGFVs is affected by the administrative proximity,the more obvious the investment imitation between companies within the same administrative division.The investment peer effect of LGFVs is also affected by geographical proximity,the closer the company is to the geographical location,the more obvious the influence of its investment decision-making behavior is.The inner mechanism of the peer effect of LGFVs is to learn from and imitate the better "leader".The existence of the same-group effect of LGFVs will enhance the company’s profitability,which is conducive to the company’s short-term profit.However,the peer effect of investment will also reduce the investment efficiency,aggravate the excessive investment.In addition,it increase the scale of interest-bearing debt of LGFVs,resulting in excessive debt,and bring long-term financial crisis to the company.On this basis,this paper puts forward corresponding policy suggestions centering on the relationship between the government and LGFVs.LGFV ought to establish a clear boundary of responsibility with the local government and the local government follow the principle of limited participation.Second,reduce the invisible guarantee function of local government,forcing LGFVs to realize profit through market means or transformation.Third,LGFVs should scientifically select reference targets for learning,improve profitability and "hematopoietic function".Fourth,the LGFVs should not only focus on the immediate interests and ignore the long-term development.This paper expands the research Angle of investment decision of LGFV,enriches the empirical research of investment decision of LGFV.It has important academic value and practical significance for improving the rationality of investment decision of LGFV,promoting the effective allocation of resources and the transformation of LGFV.