Delayed tax rebates, cash flow, and corporate spending: A quasi-experiment from China

Haiyan Zhang, Fangwen Lu and Dehua Wang

China Economic Review, 2024, vol. 85, issue C

Abstract: We study how firms altered their spending in response to an increase in liquidity as the Chinese government started to pay its outstanding export tax rebates in 2004. Our analytical strategy relies on the interaction between the time variation in the national repayments and cross-sectional variation in firms' pre-sample export share. The results show that the repayments increased cash flow, which encouraged firms to raise their R&D expenses and spending on executive perks. Compared with private firms, state-owned enterprises invested less in R&D, but spent more on executive perks. Our study is a step toward understanding the effect of the timing of tax-related actions.

Keywords: Export tax rebate; Cash flow; R&D; Executive perks (search for similar items in EconPapers)
JEL-codes: D22 G32 H25 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:85:y:2024:i:c:s1043951x24000233

DOI: 10.1016/j.chieco.2024.102134

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