Abstract: Preventing and resolving the risks of local government debt is a highly concerned issue for the country, and strengthening the supervision of local government debt is an important part of the Ministry of Finance’s lawful performance of financial supervision responsibilities. So, can financial supervision prevent and resolve the risk of local government debt? Taking the release of the 2016 “Interim Measures for the Implementation of Local Government Debt Supervision by the Offices of the Ministry of Finance in Local Fiscal Ombudsmen”as a quasi-natural experiment, and selecting the provincial-level local government debt from 2009 to 2019 as the research object, this paper studies the role of financial supervision in preventing and resolving the risks of local government debt with the double difference method. The findings show that fiscal supervision can prevent and resolve the debt risks of local governments, and that fiscal supervision and government audit supervision can play an active resultant role in preventing and resolving the local government debt risks. The influencing mechanism analysis reveals that fiscal supervision can increase the efficiency of the use of financial funds and the fiscal transparency, hence it can reduce the debt risks of local governments. Further research reveals that the higher the level of legalization, the more significant the effectiveness of fiscal supervision on local government debt risk governance; compared with the central and western regions, this effect of fiscal supervision on local government debt risks is strongerin the eastern region. Therefore, in order to optimize the collaborative mechanism between fiscal supervision and government audit supervision, it is necessary to improve the local government debt information disclosure system.

Key words: financial supervision, resident commissioner's office of the Ministry of Finance, government audit, local government debt risk