Can The Policy For Accelerated Depreciation Of The Fixed Assets Affect Corporate De-Leverage?

In order to deal with the economic crisis in 2008,the Chinese government has issued a series of expansionary fiscal policies,which promotes the continuous increase of corporate leverage in related industries.It results in many high leverage problems,such as misallocation of financial resources and rising risk exposure.In the context of China’s New Normal,the supply-side structural reform with the five priority tasks of cutting overcapacity,reducing excess inventory,deleveraging,lowering costs,and strengthening areas of weakness has been put forward,which emphasizes the significance of "deleveraging",especially reducing the leverage ratio of corporates.As one of the important policy tools,whether the policy for accelerated depreciation of the fixed assets can not only give full play to its role in improving the quality and efficiency of supply,and making old growth drivers be replaced with new ones much more rapidly,but also promote the "deleveraging"of corporates still needs to be answered by empirical test.This thesis aims to explore whether the policy for accelerated depreciation of the fixed assets(China[2014]75 of Financial and Taxation Policy and China[2015]106 of Financial and Taxation Policy)can significantly affect the deleveraging of corporates.This thesis examines the relationship between the policy and corporate leverage by the multi-period difference-in-difference model,taking the A-share manufacturing listed companies from 2012 to 2017 in Shanghai and Shenzhen Stock exchanges as samples.The empirical results show that the policy can significantly decrease the leverage of manufacturing companies in the short runs.Furthermore,this effect will show significant heterogeneity among different types of corporates.For companies with small size,heavy assets,low R&D expenditure ratio,high financing constraints and low cash holdings,the policy for accelerated depreciation plays a more significant role in deleveraging.Moreover,the research shows that the policy for accelerated depreciation of the fixed assets can affect the leverage ratio by affecting the intermediary mechanisms such as endogenous financing,fixed asset investment and R&D investment.Based on the research conclusion,this thesis make suggestions about improving the policy for accelerated depreciation of the fixed assets and furthering supply-side structural reform.The findings contribute to implementing the task of deleveraging steadily,promoting transformation and upgrading of traditional industries,and achieving high-quality economic development.