Research On The Impact Of The Reduction Of VAT Tax Rate On The Earnings Management Of Listed Companies

Because taxes are mandatory,tax payments make non-interactive transfers of corporate surpluses to the government.Surplus management is precisely the act of manipulation of surplus by enterprises.Looking back at the development of taxation,no matter what kind of taxation system the government formulates and implements,it is the process of infinite game between taxation department and taxpayers.Therefore,studying the impact of tax reform on the surplus management of micro-entities is of great significance to China’s tax reform as well as corporate governance.In recent years,tax reduction as an important fiscal policy has played an important role in reducing the burden of enterprises and injecting economic growth momentum.As the number one tax in China,the VAT tax system has undergone major and minor changes,including the implementation of three consecutive rounds of rate reductions for China’s VAT from 2017 to2019.This system is designed to improve the profitability of enterprises and create fuller and more stable cash flows.So,does the important institutional design of VAT rate reduction affect corporate surplus management behavior?First,this paper compares the existing literature on VAT rate reform,surplus management,and tax reform and surplus management,explains how multiple reductions in VAT rates affect firms’ surplus management behavior from the perspective of theoretical analysis,and conducts a series of heterogeneity analysis by distinguishing three perspectives: the nature of firms’ property rights,the degree of competition in the industry in which they operate,and their own bargaining power.On this basis,this paper considers the three consecutive rounds of VAT rate reduction policies from 2017 to2019 as policy shocks,constructs a double difference model to study the impact of VAT rate reduction shocks on listed firms’ surplus management behavior,and conducts robustness tests such as replacing explanatory variables,parallel trend tests,placebo tests,and exclusion of co-occurring events,as well as mechanism tests and heterogeneity analysis.This paper finds that(1)At the overall level,the VAT rate reduction significantly inhibits surplus management behavior at the firm level compared to firms not affected by the VAT rate reduction.(2)The alleviation of the level of corporate financing constraints is an important explanatory mechanism for the VAT rate reduction to inhibit surplus management behavior of listed firms.(3)In terms of heterogeneity,non-state-owned enterprises,enterprises in highly competitive industries and enterprises with weaker bargaining power of their own are more susceptible to the impact of VAT rate reduction and engage in surplus management behavior upward more significantly.Based on the above analysis,based on improving the value-added tax system and reducing the earnings management behavior of listed companies for the purpose of whitewashing performance,this paper puts forward the following policy recommendations: First,tax reform should adhere to strict collection and management of tax reduction;Second,government departments should comprehensively consider the content of tax reform;Third,enterprises should make full use of the advantages brought by the tax reform.