How does Local Government Debt Affect Entity Enterprises’ Credit Financing—The Heterogeneous Analysis of China’s Industrial Firms

Abstract

Abstract: Using micro-data of China’s industrial firms, this paper empirically tests how local government debt affect entity enterprises’ financing credit from both linear and nonlinear perspectives. The empirical results discover that increasing local government debt has crowding-out effect on entity enterprises’ financing credit, and this crowding-out effect presents statistically entity scale heterogeneity and ownership heterogeneity. Linear test shows that the crowding-out effect on small and micro enterprises and non-state-owned enterprises is much bigger than large scale enterprises and state-owned enterprises respectively. The nonlinear test with quadratic term and panel threshold model proves the conclusion above again, and specifically compared with large scale enterprises, crowding-out effect on small and micro enterprises is linear and without threshold effect.

Key words: local government debt, credit financing, crowding out effect, panel threshold model

CLC Number:

F812.7

HUA Xia, MA Shu-cai, HAN Yun-hong. How does Local Government Debt Affect Entity Enterprises’ Credit Financing—The Heterogeneous Analysis of China’s Industrial Firms[J]. Journal of Guizhou University of Finance and Economics, 2020(03): 33-39.

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