Abstract: Based on the transformation of the management system in merged county government, this paper uses the DID model to examine the impact of the county-to-district reform on government debt and its underlying mechanism. Our study shows that the county-to-district reform increases the scale, cost and risk of municipal investment bonds. Channel tests reveal that the reform boosts the fixed asset investment in the new districts and city-level infrastructure-related municipal investment bond. Additionally, the reform stimulates the land transactions and land revenue in these new districts, confirming the investment demand effect and land income effect. We also find that the impact of the county-to-district reform on municipal investment bonds increases over time. Further analysis shows that this impact is more significant in western regions and in cities facing lower fiscal pressure, greater economic growth challenges and no official turnover. Finally, a series of robust tests further support the main conclusions of the study. Overall, this paper verifies how management system changes driven by county-to-district reform influence investment in new districts and land transfers, subsequently affecting local government debt. It verifies the mechanism behind the reform and broadens the scope of existing research.

Key words: county-to-district reform, land financing, local government debt, municipal investment bond