Social Security Contribution, Investment And Enterprise Value

Under the circumstances of macro economy growth rate of China decreasing and the profitability of manufacturing industry declining,lessening tax revenue and diverse expense revenue became one of the importance tools for economic stability.According to current social security policy,the enterprises in China afford the social security contribution rate over 30%,which exceed that in most countries in the world.The high social security contribution rate increased the operating cost of the corporate in China and decreased the cash flow and profits of them,which is harm to their development.Fortunately,the Chinese government has noticed how serious this problem is and they published a serious of policies to deal with it.Although many scholars did contribution to social security research and find that the high social security contribution rate improved the cost of the companies,which is bad for their value creation,the direct research about the relationship between social security contribution rate and enterprise value is still not enough.So,based on the current research about social security contribution and the related theories of tax burden with enterprise value or enterprise investment,we directly researched the relationship between social security contribution rate,enterprise value and enterprise investment.First of all,we summarized the related papers and analyzed their theories.And then we established the simultaneous equations model for the research,which includes of enterprise value equation,enterprise investment equation and actual social security contribution rate equation.We used three-stage least square to deal with the simultaneous equations model which is the most common tool to solve simultaneous equations model as for it is the most efficient method.The data in this paper is come from CSMAR database and RESSET database.We used 3051 samples of the public corporations of manufacturing industry in China and we find that the increase real security contribution rate will cause the decrease of enterprise investment and the decrease of enterprise investment will cause the decline of enterprise value.More specifically,if we increase real security contribution rate 1 percent,the amount of increased investment will decrease 40.94 million yuan and the enterprise value will decrease 186.14 million yuan.It proved that improve the security contribution rate will damage the enterprise value by influence enterprise investment.Besides,we also find that the ownership systems and area are the significant factors of the relationship between security contribution rate and enterprise value.According to the conclusions we found,we consider that it is worth to decline the security contribution rate in China.And only in this way can we decrease the cost of enterprises in China and improve their value.And when we formulate the policies of security contribution,we need to consider of the ownership systems and area factors.The innovation of the paper including two aspects.One is that we researched the relationship between social security contribution rate and enterprise value and the path of the influence directly for the first time.The other is that we used the simultaneous equations model which can overcome endogenous problem.