A Study On The Effect Factors Of Thin Capilitalization Of Chinese Listed Companies

The new Enterprise Income Tax Law and its implementing regulations, which areput into effect from January1,2008introduced thin capitalization rules for the first time,so that thin capitalization becomes a hot topic of research. This paper takes the latter asthe research object in its broad and narrow definitions, that is thin capitalization whichis based on financial transactions between related parties. In the field of domestic andforeign research, thin capitalization has identified with tax avoidance in most of theexisting studies. There exists limitation on research ideas and research methods, for theybasically choose the way of normative research. Only when the appropriate conditionsare met, the enterprises can achieve the purpose of tax avoidance through thincapitalization. What the motivation of thin capitalization when the ideal conditions andthe reality got a mismatch? It is important to find whether there exists some otherfactors may influence those motivations. In order to solve these problems, this paperanalyzes the influencing factors of thin capitalization of Chinese listed companies basedon the prevention of financial transactions between related parties. This paper uses themethod of criterion and demonstration research and determining the nature andquantifying research to complete hereinafter work.This paper is divided into five chapters, the first two chapters introduce theexisting research, the related concepts and theoretical basis of thin capitalization.The third chapter analyzes the possible influencing factors of thin capitalizationbased on various economic theories, such as the theory of tax-shelter, financingconstraints, optimum distribution of resources, transaction cost, financial crisis anddividend distribution. Then six research hypotheses are put forward.The fourth chapter includes pass and result of empirical study, take the listedcompanies which have shareholders lending as examples. The first part conducts a studyon the sample data during the period between2008and2010, takes the degree of thincapitalization of related parties as the dependent variable, and possible influencingfactors as independent variables. The result suggests that the effect comes frommulti-factor, not only the tax rate differentials. The second part focuses on the thincapitalization rules in China, find that the regulations in2008have some limiting effecton leverage, affiliates reacted by reducing intra-company loans. On this basis, accordingto changes in the amount of liabilities from related parties, the sample is divided into two groups: rising group and falling group, further examines the impact of factors.The fifth chapter is the summary of the paper, including conclusions of this paper,put forward suggestions for improvement of thin capitalization rules, the limitations andfuture research outlook.