Tax incentives and the financialization of the real sector: Evidence from the accelerated depreciation policy in China

Xing Li and Guangjun Shen

Finance Research Letters, 2023, vol. 51, issue C

Abstract: Firms in the real sector are experiencing the process of financialization. Using data from China's listed firms, this study exploits the accelerated depreciation policy as a natural experiment, investigating the effect of tax incentives on corporate financialization. We find that the accelerated depreciation policy significantly reduces corporate financialization. We test two possible motives of precautionary saving and higher-return seeking. Our evidence supports that the latter channel is active – the accelerated depreciation policy decreases the cost of investment in fixed assets, making financial investment less attractive.

Keywords: Financialization; Tax incentive; Precautionary saving; Higher-return seeking (search for similar items in EconPapers)
JEL-codes: D22 G32 H32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S154461232200681X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s154461232200681x

DOI: 10.1016/j.frl.2022.103505

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().