Local officials’ sentiment and government financing cost: Evidence from Chengtou bonds in China

•We extract the textual tone of government work reports to measure local officials’ sentiment.•Local officials’ positive sentiment reduces yield spreads of Chengtou bonds.•This effect is more pronounced when government work reports are more readable.•This effect is stronger for issuers with a larger...

Full description

Saved in:
Bibliographic Details
Published in:Finance research letters 2024-05, Vol.63, p.105360, Article 105360
Main Authors: Ren, Zhaoyue, Xiong, Yang, Huang, Yongjian
Format: Article
Language:English
Subjects:
Government financing cost
Implicit guarantee
Officials
Sentiment
Citations: Items that this one cites
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:•We extract the textual tone of government work reports to measure local officials’ sentiment.•Local officials’ positive sentiment reduces yield spreads of Chengtou bonds.•This effect is more pronounced when government work reports are more readable.•This effect is stronger for issuers with a larger amount of bonds maturing.•Local officials’ sentiment has a greater influence on Chengtou bonds issued in the interbank market. This study examines the relation between local officials’ sentiment and government financing cost. Utilizing the textual tone in government work reports to measure officials’ sentiment, we find that officials’ sentiment has a negative effect on yield spreads of Chengtou bonds issued by local government financial vehicles. This effect is more pronounced for issuers located in regions with more readable government work reports, issuers with a larger amount of bonds maturing, and bonds issued in the interbank market.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2024.105360