The Empirical Research On The Impacts Of Value-Added Tax Trasformation On China’s Listed Companies’ Stock Price

Value-added tax can be divided into three Types, which areproduction-type VAT, income-type VAT and consumption-type VAT. Sincethe implementation of VAT in China in1994, it has been used in theproduction-type VAT. But with the development of market economy,production-type VAT is unable to meet the demands of economicdevelopment, while the consumption-type VAT has become the direction ofChina’s VAT reform.In this paper, it reviews the history and characteristics of VAT, and theapplication of VAT in other countries in the world. Under the guidance ofPrinciples of tax neutrality, this paper analysis the three choices of China’sVAT and the necessity of consumption-type VAT. It also studies themechanism of VAT transformation’s effects on stock price, and analysis thereform’s micro-effects on China’s listed companies. By using the event-studymethod, the author observed five events’ effects on research sample firms’AAR and CAAR, comparison sample firms’ of the same industry in otherregions and comparison sample firms’ of different industry in other regions.This study provides empirical evidence from China’s A-share stock marketfor the VAT transformation reform’s micro-effects.The empirical research results shows that, the series of VATtransformation policies have significant positive effects on research samples’stock price under the window period of [-20,+20], because these policiescan reduce the research samples’ tax burden and save the cash outflow.Because of the existence of board effect, these policies also have significantpositive effects on control sample’s stock price in the same industry. However,because these policies can not reduce the control samples’ tax burden and cannot save the cash flowout in different industry, so these policies have an negative effects on these companies’ stock price in several days. The researchalso find that these policies events leaked before they were Promulgatedofficially, which made the empirical research results under the window periodof [-20,+20] more significant than the results under the window period of[-10,+10] and [-5,+5].