Impact of implicit government guarantee on the credit spread of urban construction investment bonds
Abstract Financing sources for urban construction have garnered significant attention globally. Among various financing methods, the urban construction investment bond (UCIB) is unique to China. The UCIB credit spread, which represents the compensation for credit risk, has become a focal point for r...
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| Main Authors: | , , , , , |
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| Format: | Article |
| Language: | English |
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SpringerOpen
2024-12-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-024-00722-3 |
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| _version_ | 1850075979382259712 |
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| author | Rongda Chen Han Li Xuhui Tang Chenglu Jin Shuonan Zhang Xinyu Zhang |
| author_facet | Rongda Chen Han Li Xuhui Tang Chenglu Jin Shuonan Zhang Xinyu Zhang |
| author_sort | Rongda Chen |
| collection | DOAJ |
| description | Abstract Financing sources for urban construction have garnered significant attention globally. Among various financing methods, the urban construction investment bond (UCIB) is unique to China. The UCIB credit spread, which represents the compensation for credit risk, has become a focal point for researchers. However, owing to shortcomings of previous approaches, few scholars have accurately assessed the impact of implicit government guarantees on credit spreads. This study introduces an innovative approach that uses orthogonal decomposition to extract proprietary information from credit ratings, reflecting implicit government guarantees. After accounting for bond factors, local government financing vehicle factors, and macroeconomic conditions, the implicit government guarantee substantially reduces the UCIB's credit spread. This conclusion remains robust when controlling for investor attention, regional factors, or duration. |
| format | Article |
| id | doaj-art-46a9c0193abc4f2f8e8af0a7d380950d |
| institution | DOAJ |
| issn | 2199-4730 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj-art-46a9c0193abc4f2f8e8af0a7d380950d2025-08-20T02:46:08ZengSpringerOpenFinancial Innovation2199-47302024-12-0110113110.1186/s40854-024-00722-3Impact of implicit government guarantee on the credit spread of urban construction investment bondsRongda Chen0Han Li1Xuhui Tang2Chenglu Jin3Shuonan Zhang4Xinyu Zhang5Zhejiang Financial CollegeSchool of Finance, Zhejiang University of Finance and EconomicsSchool of Finance, Zhejiang University of Finance and EconomicsSchool of Finance, Zhejiang University of Finance and EconomicsSchool of Finance, Zhejiang University of Finance and EconomicsSchool of Finance, Zhejiang University of Finance and EconomicsAbstract Financing sources for urban construction have garnered significant attention globally. Among various financing methods, the urban construction investment bond (UCIB) is unique to China. The UCIB credit spread, which represents the compensation for credit risk, has become a focal point for researchers. However, owing to shortcomings of previous approaches, few scholars have accurately assessed the impact of implicit government guarantees on credit spreads. This study introduces an innovative approach that uses orthogonal decomposition to extract proprietary information from credit ratings, reflecting implicit government guarantees. After accounting for bond factors, local government financing vehicle factors, and macroeconomic conditions, the implicit government guarantee substantially reduces the UCIB's credit spread. This conclusion remains robust when controlling for investor attention, regional factors, or duration.https://doi.org/10.1186/s40854-024-00722-3Urban construction investment bondImplicit government guaranteeCredit ratingCredit spread |
| spellingShingle | Rongda Chen Han Li Xuhui Tang Chenglu Jin Shuonan Zhang Xinyu Zhang Impact of implicit government guarantee on the credit spread of urban construction investment bonds Financial Innovation Urban construction investment bond Implicit government guarantee Credit rating Credit spread |
| title | Impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| title_full | Impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| title_fullStr | Impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| title_full_unstemmed | Impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| title_short | Impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| title_sort | impact of implicit government guarantee on the credit spread of urban construction investment bonds |
| topic | Urban construction investment bond Implicit government guarantee Credit rating Credit spread |
| url | https://doi.org/10.1186/s40854-024-00722-3 |
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