Local urban investment bonds and the profitability of firms

Pengzhi Kong, Wenzhuo Lyu, Hao Jiang and Yong Ma

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

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.

Keywords: Urban investment bonds; Firms’ profitability; Infrastructure construction (search for similar items in EconPapers)
JEL-codes: E22 H54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001094

DOI: 10.1016/j.pacfin.2024.102358

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