High-speed railway and urban construction investment bond yield spreads: a quasi-natural experiment

Purpose - This study aims to investigate how high-speed railway (HSR) development affects urban construction investment (UCI) bond yield spreads based on China’s background. Design/methodology/approach - This study constructs a quasi-natural experiment and adopts regression analyses to empirically examine the relation between HSR development and UCI bond yield spreads. The empirical analysis is based on a Chinese sample of 15,109 bond offering observations from 2008 to 2019. Findings - The results show that HSR development reduces UCI bond yield spreads. Mechanistic analysis shows that HSR development increases land prices and the level of urbanization, which in turn lowers the UCI bond yield spreads. In addition, the impact of HSR development on UCI bond yield spreads is more significant at higher marketization levels and lower degrees of dependence on land finance cities where UCI corporations are located. Research limitations/implications - The results imply that transportation infrastructure improvement, such as HSR development, helps to enhance the credit of local governments and the solvency of UCI corporations and ultimately reduces the financing cost of UCI bonds. Originality/value - This paper provides theoretical support and empirical evidence for the impact of transportation infrastructure construction on the implicit debt risks of local governments in China, which enriches the research on the “HSR economy” from a micro perspective and expands the research on the influencing factors of local governments’ debt risk.