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Local officials’ sentiment and government financing cost: Evidence from Chengtou bonds in China

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  • Ren, Zhaoyue
  • Xiong, Yang
  • Huang, Yongjian

Abstract

This study examines the relation between local officials’ sentiment and government financing cost. Utilizing the textual tone in government work reports to measure officials’ sentiment, we find that officials’ sentiment has a negative effect on yield spreads of Chengtou bonds issued by local government financial vehicles. This effect is more pronounced for issuers located in regions with more readable government work reports, issuers with a larger amount of bonds maturing, and bonds issued in the interbank market.

Suggested Citation

  • Ren, Zhaoyue & Xiong, Yang & Huang, Yongjian, 2024. "Local officials’ sentiment and government financing cost: Evidence from Chengtou bonds in China," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003908
    DOI: 10.1016/j.frl.2024.105360
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    References listed on IDEAS

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    1. Chen, Zhuo & He, Zhiguo & Liu, Chun, 2020. "The financing of local government in China: Stimulus loan wanes and shadow banking waxes," Journal of Financial Economics, Elsevier, vol. 137(1), pages 42-71.
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    4. Zhang, Ke, 2023. "Government's implicit guarantee and the credit spread of the quasi-municipal bonds," Finance Research Letters, Elsevier, vol. 55(PA).
    5. Yang Yao & Muyang Zhang, 2015. "Subnational leaders and economic growth: evidence from Chinese cities," Journal of Economic Growth, Springer, vol. 20(4), pages 405-436, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sentiment; Officials; Government financing cost; Implicit guarantee;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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