Dataset Information

Crowding in or crowding out? How local government debt influences corporate innovation for China.

ABSTRACT: The pressure upon local governments to redeem their debt could affect government fiscal ability. It could consequently affect their fiscal policies on corporations, which might distort corporate innovation. Based on the data of Chinese Shanghai and Shenzhen A-share listed companies and the local government implicit short-term debt financed by local government financing vehicles (LGFVs) in 31 provinces, this paper shows that local government debt (LGD) negatively affects corporate R&D investment in China, thereby suggesting a strong crowding-out effect. The crowding-out effect is more pronounced when the firm is a non-state-owned enterprise (NSOE), the firm's size is small, the firm's age is young, or the firm is in the lower market competition. This paper provide evidence by interacting the terms that local government actions, such as consumption of fiscal resources, strengthening tax collection efforts, or consumption of credit resources, might partially account for the crowding-out effect. This study illustrates the innovation costs of local government debt.

SUBMITTER: Xu J

PROVIDER: S-EPMC8575287 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature

ACCESS DATA

Publications

Crowding in or crowding out? How local government debt influences corporate innovation for China.

Xu Junbing J Li Yuanyuan Y Feng Dawei D Wu Zhouyi Z He Yang Y

PloS one 20211108 11

The pressure upon local governments to redeem their debt could affect government fiscal ability. It could consequently affect their fiscal policies on corporations, which might distort corporate innovation. Based on the data of Chinese Shanghai and Shenzhen A-share listed companies and the local government implicit short-term debt financed by local government financing vehicles (LGFVs) in 31 provinces, this paper shows that local government debt (LGD) negatively affects corporate R&D investment ...[more]

PMID: 34748594

Similar Datasets

Project description:As an important source of local fiscal revenue, will enterprise tax be affected by local government debt? What role do the government's tax collection and management motives and behaviors play in this effect? By investigating the impact of local government debt on the actual tax burden of enterprises, this study shows that local governments have a trade-off of tax collection in the process of resolving the debt repayment pressure. The study finds that, in general, the expansion of local government debt has increased the actual tax burden of enterprises, which is mainly reflected in non-state-owned enterprises and enterprises that are collected and managed by the local tax department. The results of the mechanism test show that local debt pressure will encourage local governments to adjust the intensity of tax collection and tax incentives, and then increase the level of tax burden of enterprises in the jurisdiction. Furthermore, the heterogeneity test that distinguishes the institutional environment shows that there are significant differences in the taxation behavior of local governments and the impact of the corporate tax burden in different regions. Specifically, the strict tax behavior of local governments is more significant in regions with better institutional environment, while regions with worse institutional environment, due to the lack of market competitiveness, are more inclined to provide a relaxed tax collection environment to enterprises in their jurisdiction, so as to stabilize the tax base and resolve debts through long-term tax growth. In the context of unbalanced regional development, this study provides empirical evidence that the expansion of local debt affects the taxation behavior of local governments, and then affects the actual tax burden of enterprises in the jurisdiction, which is helpful to understand the government behavior during the transition period of developing countries, and provides policy implications for improving the public debt management system, creating a fair tax environment, and promoting high-quality economic growth.

Dataset Information

Crowding in or crowding out? How local government debt influences corporate innovation for China.

Publications

Crowding in or crowding out? How local government debt influences corporate innovation for China.

Similar Datasets

OmicsDI is part of the ELIXIR infrastructure

Tweets