Study On The Impact Of VAT Reform On Firm Value

Value Added Tax reform from the production type to consumption type plays an important role in the policy of structural tax reductions. This reform helps improve deductible chain, eliminate double taxation, stimulate firm investment, and enhance firm value. Based on the VAT Reform in2009, this study investigates how VAT Reform will affect firm value and the relationship between VAT reform and firm value. By studying related foreign and domestic literature, and learning the theories of cash flow hypothesis, positive effects of investment subsidies and negative effects of income tax, the study design a difference-in-differences (DID) model of VAT and firm value with479listed companies’ data of2008-2012annual report. What is more, the model introduces variables of separating degrees, property rights and business environment index in order to investigate different effects of VAT reform in different cases.Our empirical evidences show that VAT reform is conducive to enhancing firm value. And the value enhancement effect on low separating degree enterprises is much stronger than high separating degree enterprises. Furthermore, the value enhancement effect of non-state-owned enterprises is more obvious. Meanwhile, the value enhancement effect in better business environment areas is more obvious, and the effect of non-state-owned enterprises is more obvious than state-owned enterprises.This study is divided into the following parts:Part1including the first chapter, introduces the study background, ideas and methods, proposes innovations and shortcomings of this study, and conducts a review of the relevant literature.Part2including the second chapter, based primarily on the theories of cash flow hypothesis, positive effects of investment subsidies and negative effects of income tax, analyzes the impact of the VAT reform on firm value. Also the study considers the differences of separating degrees, property rights and business environment. At the end of this chapter, the study proposes four hypotheses. Part3including the third and fourth chapters, mainly analyzes the impact of VAT reform on firm value through a regression model, and further considers of the impact of different cases in separating degrees, property rights and business environment.Part4includes Chapter Five. Based on normative and empirical analysis, we make this study’s conclusions. This part also proposes policy recommendations and future research directions.