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Local urban investment bonds and the profitability of firms

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  • Kong, Pengzhi
  • Lyu, Wenzhuo
  • Jiang, Hao
  • Ma, Yong

Abstract

This paper investigates the effect of local urban investment bonds (local UIBs) on firms’ profitability in Chinese stock market. We find that the increase of local UIBs will significantly improve the profitability of local firms. Moreover, our results indicate that local UIBs affect firms’ profitability by simultaneously improving their productivity, reducing their costs, and increasing investment. Local UIBs have a more pronounced and positive effect on the profitability of firms in the central region and underdeveloped region in China. Additionally, state-owned firms and financial unconstrained firms benefit the most from the increase in local UIBs. Our results are robust to various identification strategies which address the endogeneity concern.

Suggested Citation

  • Kong, Pengzhi & Lyu, Wenzhuo & Jiang, Hao & Ma, Yong, 2024. "Local urban investment bonds and the profitability of firms," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001094
    DOI: 10.1016/j.pacfin.2024.102358
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    More about this item

    Keywords

    Urban investment bonds; Firms’ profitability; Infrastructure construction;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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