This paper investigates the effects of turnover of local officials on issuance of local government debt in China. Using the data of the municipal investment bonds issued during the period from 2004 to 2012 in China, this paper finds that policy uncertainty caused by turnover of local official will adversely affect the frequency and scale of municipal investment bond issuance. In addition, such policy uncertainty will significantly increase the risk of the municipal investment bonds and thus significantly increase the debt issuance costs; and such effect will be enhanced if the risk of policy uncertainty increases. Furthermore, when cities are under tighter pressure of repaying debts, the impact of policy uncertainty on the cost of issuing bonds becomes more significant. This study enriches our understanding of issuance of local government debt.


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