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A prediction model for the secure issuance scale of Chinese local government bonds

Bowen Jia (School of Information Science and Engineering, Lanzhou University, Lanzhou, China)
Jiaying Wu (School of Management, Lanzhou University, Lanzhou, China)
Juan Du (School of Information Science and Engineering, Lanzhou University, Lanzhou, China)
Yun Ji (School of Information Science and Engineering, Lanzhou University, Lanzhou, China)
Lina Zhu (Department of Accounting, School of Management, Lanzhou University, Lanzhou, China)

Kybernetes

ISSN: 0368-492X

Article publication date: 20 April 2020

Issue publication date: 3 May 2021

Abstract

Purpose

The purpose of this paper is to calculate the local guaranteed fiscal revenue with the local fiscal revenue of 31 provinces, and predict their guaranteed fiscal revenue in 2018 with the artificial neural network (ANN).

Design/methodology/approach

The principal components analysis (PCA), particle swarm optimization (PSO) and extreme learning machine (ELM) model was designed to produce the inputs of KMV model. Then the KMV model was used for obtaining the default probabilities under different issuance scales. Data were collected from Wind Database. MATLAB 2018b and SPSS 22 were used in the field of modeling and results analysis.

Findings

This study’s findings show that PCA–PSO–ELM proposed in this research has the highest accuracy in terms of the prediction compared with ELM, back propagation neural network and auto regression. And PCA–PSO–ELM–KMV model can calculate the secure issuance scale of local government bonds effectively.

Practical implications

The sustainability forecast in this study can help local governments effectively control the scale of debt issuance, strengthen the budget management of local debt and establish the corresponding risk warning mechanism, which could make local governments maintain good credit ratings.

Originality/value

This study sheds new light on helping local governments avoid financial risks effectively, and it is conducive to establish a debt repayment reserve system for local governments and the proper arrangement for stock debt.

Keywords

Acknowledgements

This work is supported in part by the Fundamental Research Funds for the Central Universities (Grant No. lzujbky-2019).

Conflict of Interest: The authors declare that they have no conflict of interest. This article does not contain any studies with human participants or animals performed by any of the authors. Informed consent was obtained from all individual participants included in the study.

Citation

Jia, B., Wu, J., Du, J., Ji, Y. and Zhu, L. (2021), "A prediction model for the secure issuance scale of Chinese local government bonds", Kybernetes, Vol. 50 No. 5, pp. 1125-1143. https://doi.org/10.1108/K-10-2019-0699

Publisher

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Emerald Publishing Limited

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