Empirical Research On The Impact Of The New Corporation Income Tax On The Structure Of Chinese Listed Companies

The new enterprise income tax act has been officially promulgated since January1,2008in China, the new tax act regulated unified enterprise income tax rate of25%on domestic and foreign-funded companies, and implemented unified tax preferentialpolicies which give priority to intra-industry preferential than in the regionpreferential, After the new enterprise tax act, which created a fair and competitivemarket environment,it also had a significant impact on economic development inChina.The modern capital structure theory points out that the debt is the importantfactor that affects enterprise financing and the capital market structure, the factorwhich affects the debt policy is various, but the tax is the important one without doubt.Enterprise income tax is an important factor, when enterprise in the process of debtfinancing, the debt financing interest expense can be deducted before paying tax dueto the presence of the enterprise income tax act. So debt financing can bring thebenefits of tax shield to corporations. The paper tries to discuss the change differenceof corporation income tax rate which brings the effects to capital structure of listedcompanies in China.The paper investigates the effect of enterprise tax reform on capital structure.Firstly, after reviewing some related literatures on enterprise income tax and capitalstructure, then describes the content of the tax act reform process and the newenterprise income tax act in China, and qualitatively analysis of the impact ofenterprise income tax on the essential capital structure. Secondly, I choose A-shares of517listed companies as the research object to do an empirical study betweencorporate income tax and capital structure. The research results indicate the enterprisetax has statistic effect on capital structure, the higher marginal debt ratio lead to thehigher debt ratio, As for controlling variables, the results indicate the company size ispositive correlated with capital structure, the growth of company does not havedistinct correlation with capital structure, so as the costs of financial distress, returnon asset and non-debt tax shield have negative correlation with capital structure,collateral value of assets also have s positive correlation with capital structure, duringdummy variables, majorities of industries has statistic effect on capital structure. Atlast, this paper puts forward the corresponding suggestion and countermeasures in the perspective of government and enterprise, adjust tax policies, optimize the capitalstructure and maximize enterprise value.