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Preferential Income Tax Rate and Research and Development Investment: Evidence from Small and Medium-Sized Listed Firms in China

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  • Xiaobao Song
  • Chun Guo
  • Wunhong Su

Abstract

This study investigates the impact of a preferential income tax rate on research and development investment for small and medium-sized Chinese listed firms from 2013 to 2017. The results reveal a significantly positive relation between the preferential income tax rate and research and development investment. Such a positive relation appears to be more significant for non-state-owned firms and for firms located in provinces with higher research and development intensity. The instrumental variable method, the two-stage Heckman method and propensity score matching are employed in this study to support the finding that the preferential income tax rate has a positive external impact on research and development investment. The empirical results are robust with respect to endogeneity.

Suggested Citation

  • Xiaobao Song & Chun Guo & Wunhong Su, 2020. "Preferential Income Tax Rate and Research and Development Investment: Evidence from Small and Medium-Sized Listed Firms in China," Accounting and Finance Research, Sciedu Press, vol. 9(1), pages 1-1, February.
    • Handle: RePEc:jfr:afr111:v:9:y:2020:i:1:p:1
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    3. Chanyoung Hong & Jeong-Dong Lee, 2016. "Macroeconomic effects of R&D tax credits on small and medium enterprises," Economic Systems Research, Taylor & Francis Journals, vol. 28(4), pages 467-481, October.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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