Econometric analysis reveals bond expansion reduces earnings-value correlation in local state-owned enterprises, indicating corporate governance mitigates government debt risks.
The impact of Urban Construction Investment Bond (UCIB) risks on the correlation between corporate earnings and value requires clarification. Using a fixed-effects model and generalized method of moments, this study finds that the UCIB scale expansion significantly reduces the earnings-value correlation for local state-owned enterprises (SOEs). More robust corporate governance and a more reasonable financing structure can mitigate negative effects, especially among local SOEs characterized by greater government intervention, lower marketization, and weaker oversight by non-state shareholders. The increase in UCIB greatly impacts firms’ unexpected operating cash flows. This study expands research on corporate earnings value and government debt.
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Wang et al. (2026) studied this question.
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