Local government debt transparency, investor confidence, and corporate financial risk

Wenxue Li and Fei Liu

Finance Research Letters, 2025, vol. 83, issue C

Abstract: Local government debt has become a significant concern in China’s economy. This study explores how local government debt transparency influences firms’ financial risk, analyzing a sample of publicly listed Chinese enterprises from 2013 to 2023. The results show that increased transparency in local government debt notably lowers firms’ financial risk, particularly for non-state-owned and high-tech firms. Investor confidence playing a crucial mediating role in this relationship. The findings remain consistent after performing multiple sensitivity and endogeneity tests. This research generates a crucial contribution to the expanding body of studies on local government debt.

Keywords: Local government debt; Financial risk; Transparency; Investor confidence (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325009717

DOI: 10.1016/j.frl.2025.107713

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