Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 22, 2013 erstellt
Description:
Excessive borrowing of local governments in China sparked concerns that the debt may threaten the financial stability of the economy and ultimately cause economic collapse. It becomes critically important to understand the credit rating of China's LFGV bonds and the association between the yields, credit ratings, and bond characteristics under this circumstance. We use a complete pooled data set of 771 LFGV bond issues from 1999 to 2011 and an OLS regression to examine how credit ratings might affect LGFV bond yields and an ordered probit model to study the determinants of credit ratings. The main findings are: (1) bond characteristic variables, such as bond issue size, duration, and guarantee, matter in determining yields though credit rating plays a major role in determining yields of LGFV bond issues; (2) bond issue size and bond type are the main determinants of LGFV bond credit ratings, while the bond issuer characteristics have little explanatory power; (3) smaller credit rating agency tend to give higher ratings after controlling for bond issuer and issue characteristics