Tax Incentives, R&D Manipulation, and Corporate Innovation Performance: Evidence from Listed Companies in China

Wenyan Sun, Kedong Yin and Zhe Liu
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Wenyan Sun: School of Economics, Ocean University of China, Qingdao 266100, China
Kedong Yin: Institute of Marine Economy and Management, Shandong University of Finance and Economics, Jinan 250014, China
Zhe Liu: School of Economics, Ocean University of China, Qingdao 266100, China

Sustainability, 2021, vol. 13, issue 21, 1-16

Abstract: This study investigated the R&D manipulation of Chinese listed companies under preferential tax policies based on the bunching approach. On this basis, differences in organizational performance aspirations were used to distinguish firm heterogeneity. This was to clarify how tax incentives affected firm innovation performance. The empirical results show that preferential tax policies can effectively reduce the actual tax burden of high-tech enterprises. Some companies have enjoyed corporate income tax breaks by manipulating R&D spending. The counterfactual estimate of R&D intensity shows that the elasticity of taxable income of R&D investment of listed companies in China is between 0.55 and 0.8. The elasticity of taxable income of manufacturing enterprises is between 0.6 and 0.75. Furthermore, within the R&D operating range, firm-level variations will affect innovation performance. The incentive effect of R&D activities of enterprises with a negative organizational performance aspiration gap is higher than that of enterprises with a positive organizational performance aspiration gap. The conclusion provides the basis for the country to improve preferential tax policies for high-tech enterprises.

Keywords: tax incentives; R&D manipulation; organizational performance aspiration gap; innovation performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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