Quasi-natural experiment demonstrates that value-added tax rate cuts reduce corporate leverage in Chinese firms, suggesting improved capital structure and reduced debt risk.
Key Points
Value-added tax rate reform significantly reduced total corporate financial leverage, driven primarily by a decrease in short-term liabilities.
Profitability and operating cash flows served as major intermediary channels, mitigating corporate asset–liability mismatch and overall debt risk.
Quasi-natural experiment analysis shows stronger deleveraging in enterprises characterized by elastic demand and lower intermediate input ratios.