This paper empirically tests the effect and mechanism of local debt explicit governance on the high-quality development of enterprises by using the intensity difference in difference method in a quasi-natural experiment with the reform of the local debt management system after the implementation of the Budget Law in 2015. The study finds that：local debt explicit governance policy shock can significantly contribute to the high-quality development of enterprises.The scale effect of local debt explicit governance is conducive to improving the enterprise innovation environment and promoting high-quality enterprise development through the mechanism of increasing the input of enterprise innovation factors, while the structural effect of local debt explicit governance is conducive to easing the enterprise financing constraints and promoting high-quality enterprise development through the mechanism of optimizing the efficiency of enterprise capital allocation.In addition, the effect of local debt explicit governance on improving the quality of enterprise development is heterogeneous by the nature of enterprise property rights and the level of implicit debt ratio in the region. Further extension of the analysis reveals that explicit governance of local debt also significantly improves inter-firm resource allocation efficiency. From the perspective of the micro effects of local debt explicit governance, the findings of the study provide policy references for the establishment of a local debt management mechanism compatible with high-quality development and the realization of the dual objectives of local debt governance, namely, “promoting development” and “preventing risks”.