Research On The Effects Of Both Capital Adjustment And Tax Credit For R&D Investment

In recent years, using tax incentive has become an important measure for governments around the world to stimulate research and development of enterprises. Unfortunately, the domestic and foreign researches on the R&D tax incentive problem have not form a unanimous conclusion. So it’s necessary to discuss it further from other perspectives. Given that capital adjustment may generate relevant adjustment cost, which is an important factor cannot to be ignored to change the enterprise investment and capital stock, and the current domestic literatures that study the effect of capital adjustment and tax incentives to R&D investment are rare whether theoretically or empirically. This paper provides a deep analysis of R&D tax incentive effects from the perspective of theory and practice under the condition of considering adjustment costs.In theory, this paper builds a R&D investment model which considers adjustment costs and tax incentives. Through mathematical analysis, we found that since the company in the investment process will face adjustment costs more or less, so the tax incentive does not necessarily promote the strength of R&D investment for the company. Under the given tax incentives environment, whether the company’s actual adjustment cost is out of its scope willing to bear is the key for the company to decide how to manage the R&D. At the same time, this paper also found that with the increase of adjustment costs, the marginal effect of the tax incentives to R&D investment showed a decreasing trend with the increase of adjustment costs.On empirical, considering the situation that most of the current domestic researches on R&D tax credit problems focused on the macro level, this paper chooses the listed companies which belong to high-tech industry in the stock market of Shanghai and Shenzhen as research samples, then performed an empirical analysis and robustness testing on capital adjustment, tax incentives and the influence of R&D investment, the results showed that:1) the influence of the tax incentives to R&D investment in different period is not the same.2) The adjustment costs showed significant influence on corporate R&D activity. if the company found that the actual adjustment cost is more than what they can accept in the process of investment, the adjustment costs will not show enthusiasm as the government expect to improve the intensity of R&D investment even when it is in the given tax incentives environment,. 3) The increase of a company’s previous yield has a negative influence on the current R&D investment. This indicates that China’s high-tech listed companies did not show a good stability in the aspect of R&D investment because of its own development characteristics.The innovation in this paper is mainly reflected as follows:Firstly, we analyse the mechanism of tax incentive and R&D investment theoretically, and provide a kind of theoretical reference for empirical studies about R&D tax incentive issues. Secondly, this paper considers adjustment costs in our analysis, and provides a new perspective for some tax incentive issues. Thirdly, unlike previous studies, we use the data from Chinese high-tech listed company which is in the micro-level when we analyse our problem.