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Tax preference, financing constraints and enterprise investment efficiency—Experience, of China’s enterprises investment

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  • Liangliang Zhai
  • Yujing Feng
  • Fumin Li
  • Liping Zhai

Abstract

This paper takes the 2014 pilot project of accelerated depreciation of fixed assets as a quasi-natural experiment, and builds a Propensity Score Matching–Difference in Differences (PSM-DID) model based on the data of Chinese listed companies from 2000 to 2019 to test the impact of tax preference on enterprise investment efficiency and its mechanism. The results show that the policy inhibits supported enterprises investment efficiency significantly. Heterogeneity analysis shows that the policy causes greater investment efficiency losses for small and medium-sized enterprises, non-state-owned enterprises and asset-heavy enterprises. The mechanism test found the reason why the policy eased financing constraints but inhibited investment efficiency in short-term. After a variety of robustness tests, the above basic conclusions are still valid. Although the accelerated depreciation policy of fixed assets is conducive to expanding the scale of investment, the incentive effect on investment efficiency is not obvious, and even shows a restraining effect. Given the existence of heterogeneity, the design of the policy should not only distinguish industries, but also pay attention to the differences between different enterprises in the same industry. Strengthening research and development (R&D) innovation and improving the matching mechanism between human capital and fixed investment will help give full play to the incentive effect of this policy. The research in this paper helps to deepen the understanding of the microeconomic effects of tax policy and identify the internal mechanism, which not only enriches the relevant literature, but also provides a reference for the government to better use tax policy to promote the high-quality development of enterprises.

Suggested Citation

  • Liangliang Zhai & Yujing Feng & Fumin Li & Liping Zhai, 2022. "Tax preference, financing constraints and enterprise investment efficiency—Experience, of China’s enterprises investment," PLOS ONE, Public Library of Science, vol. 17(9), pages 1-26, September.
    • Handle: RePEc:plo:pone00:0274336
    DOI: 10.1371/journal.pone.0274336
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    References listed on IDEAS

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    1. Elahi, Ehsan & Khalid, Zainab & Weijun, Cui & Zhang, Huiming, 2020. "The public policy of agricultural land allotment to agrarians and its impact on crop productivity in Punjab province of Pakistan," Land Use Policy, Elsevier, vol. 90(C).
    2. Elahi, Ehsan & Khalid, Zainab & Zhang, Zhixin, 2022. "Understanding farmers’ intention and willingness to install renewable energy technology: A solution to reduce the environmental emissions of agriculture," Applied Energy, Elsevier, vol. 309(C).
    3. Elahi, Ehsan & Zhang, Zhixin & Khalid, Zainab & Xu, Haiyun, 2022. "Application of an artificial neural network to optimise energy inputs: An energy- and cost-saving strategy for commercial poultry farms," Energy, Elsevier, vol. 244(PB).
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