Research on the Influence of Information Accuracy on the Coupon Rate of Local Government Special Bonds in China

Abstract

The pilot policy of revenue bonds for special project implemented in June 2017 is essentially a transition from packaged issuance to unpacked issuance, which has improved the information accuracy in terms of identifying municipal and county local governments in China. In order to examine the impact of information accuracy on the coupon rate of local government special bonds, this paper regards the pilot policy as a quasi-natural experiment and conducts an empirical study by using the propensity score matching method. The empirical conclusions show that the increased accuracy of information due to the pilot policy has significantly increased the coupon rate of China’s local government special bonds. However, increasing the information accuracy blindly may trigger the Matthew Effect and increase the financing costs of local governments continuously, which is not conducive to the sustainable development of China’s local government special bonds. Therefore, it is necessary to strengthen the management of optimal information accuracy and increase the intensity of information disclosure, so as to realize the financing restriction mechanism of China’s local government special bonds market under the balance of the interests between market entities and the government.