Does the Value-added Tax Reform Restrain Corporate Financialization? Based on the Perspective of Credit Refund Policy

This paper studies the impact of tax reform on corporate financialization based on the sample data of China's A-share manufacturing industry. Using the VAT credit refund policy in China as an exogenous shock to conduct a difference-in-differences estimation, we find that the credit refund policy can significantly inhibit corporate financialization. The intermediary mechanism shows that the credit refund policy has a restraining effect on corporate financialization by alleviating cash flow constraints and encouraging the investment scale of the core business. The heterogeneity test shows that the policy effect is more obvious in non-state-owned enterprises, non-eastern regions, and enterprises with higher financial constraints. These findings have important implications for promoting VAT reform and governing corporate financialization. JEL Classification G30 H20