Query Result Set
Skip Navigation Links
   ActiveUsers:496Hits:21068892Skip Navigation Links
Show My Basket
Contact Us
IDSA Web Site
Ask Us
Today's News
HelpExpand Help
Advanced search

  Hide Options
Sort Order Items / Page
M-M THEORY (1) answer(s).
 
SrlItem
1
ID:   170091


Effect of value-added tax on leverage: evidence from China’s value-added tax reform / Zou, Jingxian   Journal Article
Zou, Jingxian Journal Article
0 Rating(s) & 0 Review(s)
Summary/Abstract In this paper, we use China’s value-added tax (VAT) reform in 2007, which was aimed to encourage fixed investment purchasing, as a natural experiment to explore the effect on firm financial leverage. Results show an expansion in firm balance sheet after the reform, manifested by greater liabilities (long-term, short-term and total liability) and asset. Moreover, in terms of the ratio to asset, it’s found that long-term liability rose while the short-term liability dropped, and as a net effect, the total asset-liability ratio declined as the latter effect dominated. To theoretically explain the observed patterns, three mechanisms are highlighted, “income effect”, “maturity-match effect” and “market disciplining effect”, where income effect corresponds to a proportional expansion of balance sheet while the latter two effects alter the composition of firm leverage.
Key Words Tax Reform  Capital Structure  Value-Added  Debt Maturity  M-M Theory 
        Export Export