The Impact of Financing Constraints on the Efficiency of Investment and Construction: Evidence from Municipal Infrastructure in China

Imperfect external capital market and internal soft budget constraints are important reasons for the issue of enterprise financing constraints. This paper studies the impact of financing constraints and influencing factors of financing constraints in municipal infrastructure investment and construction for local governments by using the panel data from 2003 to 2018 in China. The results show that, first, there are great financing constraints in municipal infrastructure investment and construction for local government in China. Second, the increase of self-financing capacity and external financing capacity can reduce the level and uncertainty of financing constraints, thus improving the efficiency of municipal infrastructure investment and construction. Third, the expansion of the city scale may reduce the uncertainty of financing constraints, but improve the level of financing constraints thus reducing the efficiency of municipal infrastructure investment and construction.