In the context of the continuously increasing risk of local
government debt, reducing the issuance cost of urban investment bonds have
become major concerns in society. Studying the impact and mechanisms of the new
budget law, implemented under a stringent regulatory environment, on the
issuance cost of urban investment bonds holds significant practical
implications. This paper selects balanced panel data of urban investment bonds
and industrial bonds issued nationwide from 2009 to 2021 as the research sample.
The multi-period difference-in-differences (DID) method is employed to examine
the impact and mechanisms of relevant government actions on the issuance cost
of urban investment bonds. The results indicate that the promulgation and
implementation of the new budget law have reduced the issuance price and
financing cost of local bonds, thereby improving the financing environment for
urban investment bonds. The examination of the action mechanisms reveals that
the debt repayment situation of each province in these years plays a strong
moderating role in the policy's impact. Moreover, these government actions
influence the pricing and financing environment of urban investment bonds by
standardizing their ratings. The research conclusions of this paper hold clear
policy implications, providing guidance and reference value for the work of
relevant government departments.
JEL classification numbers: C12, D74.
Keywords: Urban investment bonds, Bond prices, Systemic financial