Abstract: In recent years, local government financing platforms have undergone a“reckless”style of development, resulting in a substantial increase in government implicit debt due to extensive borrowing, and a sharp rise in the default risks of local government financing platforms as well. As the primary financing force for local government infrastructure projects, the transformation of local financing platforms has become a crucial approach to mitigating implicit debt risks. Based on a comprehensive credit risk model and an indefinite discrete recursive model, as well as the data from local financing platforms between 2017 and 2021, this paper conducts a study. The findings show that theintegration and restructuring of local financing platforms can leverage implicit guarantee expectations to subsequently reduce default risks. Under the moderating effect of implicit guarantee expectations, the integration and restructuring of local financing platforms can reduce default risks primarily through credit effects, operational effects, and interest rate effects. The heterogeneity analysis reveals that this impact is more significant among enterprises with smaller scales, weaker profitability, and regions with less developed economies. The extended analysis reveals that the integration for conglomerate enterprises can not only reduce the default risks of local financing platforms but alsoprogressively diminish the dependence on the implicit guarantee expectations as the conglomerate’s marketization develops. This constitutes a win-win choice. The above conclusion suggests that the integration and restructure of the local financing platforms can effectively reduce their default risks and further address the issues of hidden government debt.

Key words: local financing platform, integration and restructuring, implicit guarantee expectations, default risks