67. Impact of the Corporate Income Tax Reform on Capital Structure Choices: Evidence from Data of Chinese Listed Firms

This paper investigates the influence of the corporate income tax reform in 2007 on capital structure choices of firms in China. The results show that corporate income tax reform decreases the effective tax rate of firms totally. The effective tax rate decreases from the year of the reform and then goes up with the increase of the average leverage during the year of 2009–2010. The results also show that the corporate income tax rate is a determinant of capital structure and the change of effective tax rate has positive impact on the change of leverage. There is no evidence that non-debt tax shields are determinants of capital structure and there is not a substitution effect between debt and non-debt tax shields in our sample.