Local tax rebates, corporate tax burdens, and firm migration: Evidence from China

Wu, Leilei; Wang, Yaping; Lin, Bingxuan; Li, Chen; Chen, Shaw

doi:10.1016/j.jaccpubpol.2007.08.003

Cited by 65 publications

(39 citation statements)

References 24 publications

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“…6 These firms come from seven provinces (Hebei, Shandong, Jiangsu, Zhejiang, Fujian, Guangdong, and Hainan) or three autonomous districts (Beijing, Shanghai, and Tianjin) in east and southeast China. Although we include less than one third of the provinces and autonomous districts, 7 these regions play the most significant role in the Chinese economy (see Wu et al, 2005).…”

Section: Sample and Methodologymentioning

confidence: 99%

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Corporate tax, capital structure, and the accessibility of bank loans: Evidence from China

Yue

2009

Journal of Banking & Finance

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In this paper, we investigate whether listed firms in China adjust their capital structure in response to an increase in the corporate tax rate. Although theories of capital structure suggest that corporate tax is an important determinant of capital structure, how exogenous changes of the tax rate affect firms' leverage decisions has not been fully explored. We examine a unique circumstance in which the Chinese government increased the corporate tax rate of firms that had previously received local government tax rebates. The evidence indicates that these firms increased their leverage when the corporate tax rate increased. Further investigation suggests that the adjustment of leverage was mostly driven by firms with a high level of access to bank loans.

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Section: Sample and Methodologymentioning

confidence: 99%

“…Further tests indicate that the leverage changes are due to an increase of liability.LGTR-HA firms increase their liability more than LGTR-LA firms do.18 Wu et al (2005) find that firms that changed their registered addresses did have less effective tax rates.…”

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confidence: 94%

Corporate tax, capital structure, and the accessibility of bank loans: Evidence from China

Yue

2009

Journal of Banking & Finance

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“…for the refund and how much of the refund would be paid were up to the discretion of local governments (Wu, Wang, Lin, Li, & Chen, 2007). When a local government found it hard to get a favorable ground to grant preferential income tax rate to a firm, they used to resort to this "first tax last refund" practice to relieve the tax burden on their listed companies.…”

Section: China's Tax Regimes and Fiscal Support From Local Governmentsmentioning

confidence: 99%

Fiscal Support and Earnings Management

2016

The International Journal of Accounting

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Additional information:Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Fiscal Support and Earnings ManagementAbstract: It is well documented that firms tend to manipulate earnings before IPO (initial public offerings) and SEO (seasoned equity offerings). This study contributes to the literature by providing the first evidence on whether and how fiscal support in the form of preferential tax treatment and financial subsidy affects a firm's earnings management behaviors. Using data for Chinese firms that have conducted IPO and SEO, I find that firms have a lower level of earnings management prior to the offerings if they enjoy more preferential tax treatment or more financial subsidies from local governments. My results are consistent with the view that firms that receive stronger fiscal support have smaller demand for earnings management, which is a costly tool for a firm to achieve its desired earnings targets.JEL classification: M41; M48; G14; G15; G18; H32

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“…Liu and Chao (2007) use the listed companies' data in China and their empirical results show the relationship between ETRs and SOEs is significant. Later Huang et al (2013) get the same results as Wu et al (2007).…”

Section: Introductionmentioning

confidence: 59%

“…And the empirical result is firms with political connections pay tax at lower effective rates. Wu et al (2007) argue SOEs in China pay higher ETRs because SOEs are more sensitive to politics. However, their empirical results indicate the relationship between ETRs and SOEs is insignificant.…”

Section: Introductionmentioning

confidence: 99%