Tax Burden and Corporate Investment Efficiency

Yu Lu (), Rui Liu, Yuhe Cao and Yuhan Li
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Yu Lu: Business School, Beijing Technology and Business University, Beijing 100048, China
Rui Liu: Business School, Beijing Technology and Business University, Beijing 100048, China
Yuhe Cao: Business School, Beijing Technology and Business University, Beijing 100048, China
Yuhan Li: Business School, Beijing Technology and Business University, Beijing 100048, China

Sustainability, 2023, vol. 15, issue 3, 1-16

Abstract: Using A-share listed companies in Shanghai and Shenzhen from 2015 to 2021 as the research sample, a fixed-effects model was used to examine the effect of the reduction of corporate tax burden on investment efficiency under the tax reduction policy, as well as the role of tax avoidance and financing constraints in the mechanism. The results of the study show that the reduction of tax burden can effectively improve the efficiency of corporate investment, and this positive effect is reflected in the alleviation of corporate under-investment and discouragement of over-investment. The paper also analyses the mechanism through which tax burden affects the efficiency of corporate investment, and finds that tax reduction can discourage inefficient investment by reducing corporate tax avoidance and alleviating corporate financing constraints. In further analysis, it is found that the effect of tax cuts on investment efficiency is more significant in the sample of non-state enterprises, low corporate governance and low marketisation. The findings of the study support the positive significance of the current tax reduction policy. We provide a reference of tax reduction benefits to curb tax avoidance behavior, and provide a basis for relevant policy departments to further accelerate the implementation of tax reduction policies.

Keywords: tax burden; degree of tax avoidance; financing constraints; efficiency of investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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