Government procurement, local government fiscal pressure, and corporate debt default risk

Using data from Chinese listed companies, this study finds that the beneficial effect of government procurement on corporate debt default risk depends on local governments’ fiscal conditions. Specifically, higher local fiscal pressure weakens the risk-mitigating effect of government procurement by increasing payment delays, which are associated with greater accounts receivable accumulation and tighter financing constraints. These findings suggest that fiscal pressure reduces the effectiveness of government procurement in supporting firms’ financial stability and highlight the importance of improving government payment efficiency and strengthening procurement oversight.