The transmission effect of local government fiscal burdens: Evidence from commercial credit

We investigate how local government fiscal pressure is transmitted to corporate commercial credit provision. Heightened fiscal pressure significantly reduces firms’ net commercial credit supply. Mediation analysis reveals three transmission channels: expanded debt issuance crowds out corporate loan availability; intensified tax administration increases corporate tax burdens; and reduced government subsidies constrain corporate cash flows. Collectively, these mechanisms compel firms to curtail commercial credit extension. Heterogeneity analysis demonstrates that regions heavily dependent on debt, land revenue or tax revenue experience amplified adverse impacts; firms with higher customer concentration and supplier concentration and weaker institutional backing exhibit greater vulnerability. We demonstrate the microeconomic consequences of fiscal stress, emphasizing the importance of diversified revenue structures and robust government–business relationships for sustainable economic development.