The Impact Of Employees’ Social Insurance Contributions On Financing Constraints Of Small And Medium-sized Enterprises

The Social Insurance Law,implemented in July 2011,specifically serves to provide a precise legal basis for the collection and management of social security contributions in China.What is noteworthy is that the Law clarifies the obligations and responsibilities of social security collection agencies and gives them the right to take coercive measures similar to taxation,which greatly increases the strength and rigidity of social security fee collection and makes social security fees a veritable "quasi-tax" in China.At the same time,Chinese enterprises have also made corresponding behavioral decisions according to the implementation of the Law,and it can be said that the promulgation and implementation of the Social Insurance Law has brought important impacts to Chinese enterprises,especially SMEs.The problem of financing constraints and expensive financing for SMEs is a long-term and inevitable problem.Based on the data of small and medium-sized listed companies from 2005-2015,this paper uses the KZ index as a measure of corporate financing constraints and a double difference model to study the impact of the implementation of the Social Insurance Law on corporate financing constraints.The study finds that(1)overall the policy of the Social Insurance Law has a significant positive impact on the level of financing constraints of SMEs,i.e.,the financing constraints of enterprises are enhanced.The policy change increases SMEs’ contribution burden by regulating their social insurance contribution behavior,which reduces their internal cash holdings and affects the endogenous financing constraint;meanwhile,the actual contribution rate increases,which is closer to the nominal contribution rate,making the degree of information asymmetry decrease,and the external principal-agent cost decreases,which affects the exogenous financing constraint and ultimately positively affects the overall financing constraint.(2)The policy effect of this social security contribution shows enterprise heterogeneity,and the results of grouping by enterprise nature show that the policy significantly enhances the financing constraint level of non-state enterprises,while the effect on state-owned enterprises is not significant;it has a greater impact on SMEs in provinces with a higher level of legal system,and SMEs with a poor legal environment do not show significant changes in financing constraints;compared with enterprises in the western region,the promulgation of the Social Insurance Law has a greater degree of impact on enterprises in the eastern and central regions than those in the western region.(3)Further study of the financing structure reveals that the policy has significantly slowed down the equity financing behavior and strengthened the debt financing behavior of SMEs,indicating that the equity financing constraint has increased while the debt financing constraint has been relatively alleviated,but the alleviation of the debt financing constraint cannot completely offset the increase in the level of endogenous financing constraint and equity financing constraint.(4)Further study the effect of the phased reduction policy in 2016,and the reduction in social insurance premium rates and the corresponding decrease in SME financing constraints corroborate the previous findings and further indicate that the reduction in social insurance premium rates has a substantial effect on alleviating SME financing constraints.The above results help to understand the impact of social insurance contribution rate level on SMEs’ financing behavior,enrich the study of SMEs’ financing constraints,and provide some empirical references for the current tax reduction and fee reduction policy reform.