The impact of China’s VAT reform policy on financial performance of listed companies in China’s cultural industry

Figures & data

Table 1. ‘VAT reform’ pilot projects.

Pilot start time	Pilot industry	Pilot areas
January 1, 2012	1 + 6 (Transportation and part of Modern service industries)	Shanghai
September 1, 2012	1 + 6 (Transportation and part of Modern service industries)	The Beijing municipal
October 1, 2012	1 + 6 (Transportation and part of Modern service industries)	Jiangsu, Anhui
November 1, 2012	1 + 6 (Transportation and part of Modern service industries)	Fujian, Guangdong
December 1, 2012	1 + 6 (Transportation and part of Modern service industries)	Tianjin, Hubei province, Zhejiang Province
August 1, 2013	1 + 6 (Transportation and part of Modern service industries)	The national
August 1, 2013	Radio, Film, and Television Services	The national
January 1, 2014	Railway transportation, postal service	The national
June 1, 2014	The telecoms industry	The national
May 2016	Construction, real estate, finance, and consumer services	The national

Source: the author.

Table 2. Variable definition and description.

Variable meaning	Variable symbol	Variable declaration
Return on equity	ROE	Net profit / owner’s equity
The policy of replacing business tax with VAT	Time*Treat	If time = 1 and treat = 1, the value is 1; otherwise, the value is 0
Net cash flow from operating income	CASH	Net cash flow from operating activities / total operating income
Price-to-book	PB	Price per share / net assets per share
Equity structure	TOP10	Sum of shareholding ratio of top 10 shareholders of listed companies
Growth	GROWTH	Net profit growth rate
The enterprise scale	SIZE	The scale of an enterprise is equal to the logarithm of its total assets at the end of the previous year
Enterprise nature	SOE	For the nature of enterprise, the value of state-owned enterprise is 1 and that of non-state-owned enterprise is 0
Industry dummy variable	IND	Control industry
Annual dummy variable	YEAR	Control year

Source: the author.

Table 3. Descriptive statistics of main variables.

Variable	Observations	Mean value	Standard deviation	Minimum	Maximum
ROE	393	0.0583	0.298	−5.289	0.43
Time	393	0.201	0.401	0	1
Treat	393	0.545	0.499	0	1
CASH	393	0.101	0.184	−1.256	0.77
PB	393	3.541	3.125	0.431	35.41
TOP10	393	57.99	15.16	15.1	94.35
GROWTH	393	−1.073	11.93	−141.1	53.75
SIZE	393	21.76	1.231	16.52	25.1
SOE	393	0.471	0.5	0	1

Source: the author.

Table 4. Balance test.

Concomitant variable	Unmatched(U)/ Matched(M)	Treatment group	Control group	Deviation%	T-value	P-value
CASH	U	0.0876	0.1173	−16.6	−1.6	0.11
	M	0.095	0.1011	−3.4	−0.4	0.693
PB	U	4.1209	2.8468	41.8	4.11	0
	M	3.8282	4.1381	−10.2	−0.78	0.434
TOP10	U	59.116	56.636	16.3	1.62	0.106
	M	59.194	58.324	5.7	0.6	0.552
SIZE	U	21.672	21.861	−15.5	−1.52	0.13
	M	21.718	21.74	−1.8	−0.18	0.856
GROWTH	U	−1.021	−1.1362	1	0.1	0.924
	M	−0.8752	−1.2363	3.1	0.32	0.752

Source: the author.

Table 5. The impact of ‘VAT reform’ on the financial performance of cultural enterprises.

	PSM + DID			DID
	(1)	(2)	(3)	(4)
Time	−0.0306	−0.0405**	−0.0577***	−0.0612***
	(−1.50)	(−2.27)	(−2.81)	(−2.92)
Treat	0.0134	0.0060	0.0122	0.0140
	(1.13)	(0.56)	(0.65)	(0.74)
Time*Treat	0.0485*	0.0475**	0.0437*	0.0398*
	(1.77)	(1.99)	(1.95)	(1.78)
CASH		0.1012***	0.1130***	0.1183***
		(3.22)	(3.46)	(3.73)
PB		0.0013	−0.0051**	−0.0018
		(0.61)	(−2.13)	(−0.82)
TOP10		0.0016***	0.0013***	0.0013***
		(4.47)	(3.28)	(3.09)
SIZE		0.0197***	0.0303***	0.0284***
		(4.00)	(5.24)	(4.89)
GROWTH		0.0065***	0.0056***	0.0071***
		(8.20)	(7.41)	(9.95)
SOE		−0.0463***	−0.0816***	−0.0737***
		(−4.31)	(−5.84)	(−5.31)
YEAR			Y	Y
IND			Y	Y
Constant term	0.0671***	−0.4400***	−0.6122***	−0.5674***
	(7.80)	(−3.76)	(−4.22)	(−3.89)
N	381	381	381	393
adj. R^2	0.0121	0.2590	0.3635	0.4207
F	2.5459	15.7617	7.3826	9.1329

Note: ***, **, * are significant at the level of 1%, 5%, and 10% respectively. The following table is the same.

Source: the author.

Table 6. The impact of the 'VAT reform’ on the financial performance of manufacturing enterprises and non-manufacturing enterprises.

	Manufacturing companies		Non-manufacturing companies
	(1)	(2)	(3)	(4)
Time	−0.028	−0.0459	−0.0352**	−0.0383**
	(−0.96)	(−1.28)	(−2.55)	(−2.40)
Treat	0.0145	0.0509	−0.0107	−0.0152
	−0.81	−1.48	(−1.29)	(−1.00)
Time*Treat	0.0636	0.0687*	0.0077	0.0055
	−1.6	−1.72	−0.43	−0.32
CASH	0.2345***	0.2165***	0.0004	0.036
	−3.65	−3.14	−0.02	−1.57
PB	−0.0173***	−0.0201***	0.0071***	0.0065***
	(−3.73)	(−4.06)	−4.32	−3.73
TOP10	0.0022***	0.0023***	0.0004	0
	−3.77	−3.3	−1.25	−0.07
SIZE	0.0141*	0.0220**	0.0261***	0.0217***
	−1.74	−2.29	−6.11	−3.92
GROWTH	0.0065***	0.0066***	0.0033***	0.0038***
	−6.12	−5.94	−3.86	−4.53
SOE	−0.0586***	−0.0748***	−0.0473***	−0.0233**
	(−2.67)	(−2.86)	(−5.32)	(−1.98)
YEAR		Y		Y
IND		Y		Y
Constant term	−0.3428*	−0.5097**	−0.4751***	−0.3283**
	(−1.82)	(−2.27)	(−4.75)	(−2.34)
N	185	185	196	196
adj. R^2	0.3576	0.3723	0.3741	0.4493
F	12.381	5.7442	13.9485	7.9175

Source: the author.

Table 7. The impact of the ‘VAT reform’ on the financial performance of state-owned and private enterprises.

	State-owned enterprises		Non-state-owned enterprises
	(1)	(2)	(3)	(4)
Time	−0.0320**	−0.0476***	−0.0125	−0.0352
	(−2.11)	(−2.65)	(−0.41)	(−1.05)
Treat	0.0081	0.0177	0.0099	−0.0288
	(0.82)	(1.14)	(0.54)	(−0.84)
Time*Treat	0.0441**	0.0338*	0.0197	0.0121
	(2.32)	(1.96)	(0.44)	(0.28)
CASH	0.0212	0.0464	0.1814***	0.1498***
	(0.77)	(1.63)	(3.42)	(2.76)
PB	0.0093***	0.0056***	−0.0269***	−0.0336***
	(5.81)	(3.15)	(−4.88)	(−5.75)
TOP10	0.0015***	0.0017***	0.0008	−0.0002
	(4.91)	(4.81)	(1.27)	(−0.34)
SIZE	0.0287***	0.0276***	−0.0150	0.0045
	(6.89)	(4.96)	(−1.48)	(0.35)
GROWTH	0.0020	−0.0002	0.0070***	0.0061***
	(1.34)	(−0.15)	(6.98)	(6.26)
YEAR		Y		Y
IND		Y		Y
Constant term	−0.6528***	−0.6386***	0.3970	−0.0424
	(−6.72)	(−4.88)	(1.59)	(−0.13)
N	202	202	179	179
adj. R^2	0.3897	0.5311	0.3263	0.4272
F	17.0461	8.8515	11.7784	6.7726

Source: the author.

Table 8. Robustness test: Choose other PSM measurement methods and increase control variables.

	Different PSM measurement methods were used
	(1)	(2)	Add control variables
Time	−0.0578***	−0.0564***	−0.0586***
	(−2.81)	(−2.75)	(−2.85)
Treat	0.0122	0.0115	0.0082
	(0.65)	(0.62)	(0.43)
Time*Treat	0.0438*	0.0442**	0.0437*
	(1.95)	(1.99)	(1.95)
CASH	0.1132***	0.1095***	0.1113***
	(3.46)	(3.39)	(3.40)
PB	−0.0051**	−0.0031	−0.0046*
	(−2.12)	(−1.36)	(−1.85)
TOP10	0.0013***	0.0012***	0.0013***
	(3.28)	(3.04)	(3.16)
SIZE	0.0303***	0.0290***	0.0332***
	(5.23)	(5.04)	(4.97)
GROWTH	0.0056***	0.0057***	0.0056***
	(7.40)	(7.42)	(7.38)
SOE	−0.0814***	−0.0762***	−0.0789***
	(−5.82)	(−5.56)	(−5.52)
LEV			−0.0325
			(−0.87)
YEAR	Y	Y	Y
IND	Y	Y	Y
Constant term	−0.6136***	−0.5833***	−0.6483***
	(−4.22)	(−4.03)	(−4.30)
N	380	386	381
adj. R^2	0.3626	0.3521	0.3630
F	7.3420	7.1543	7.1883

Source: the author.

Table 9. Robustness test: expanding the sample size of the experimental group.

	Full sample	Manufacturing companies	Non-manufacturing companies	Non-state-owned enterprises	State-owned enterprises
		(1)	(2)	(1)	(2)
Time*Treat	0.0293*	0.0840**	−0.0085	0.0306**	0.0081
	(1.68)	(2.29)	(−0.70)	(2.41)	(0.23)
CASH	0.1194***	0.2159***	0.0451**	0.0513*	0.1523***
	(3.76)	(3.13)	(2.11)	(1.91)	(2.78)
PB	−0.0017	−0.0058	0.0064***	0.0068***	−0.0250***
	(−0.79)	(−1.51)	(3.69)	(4.43)	(−4.31)
TOP10	0.0012***	0.0018***	0.0001	0.0017***	−0.0002
	(3.02)	(2.64)	(0.39)	(5.14)	(−0.30)
SIZE	0.0278***	0.0240**	0.0238***	0.0260***	−0.0032
	(4.82)	(2.51)	(4.61)	(4.74)	(−0.24)
GROWTH	0.0070***	0.0079***	0.0038***	0.0008	0.0076***
	(9.88)	(7.65)	(4.60)	(0.59)	(8.09)
SOE	−0.0737***	−0.0762***	−0.0254**
	(−5.33)	(−2.98)	(−2.31)
YEAR	Y	Y	Y	Y	Y
IND	Y	Y	Y	Y	Y
Constant term	−0.5392***	−0.4996**	−0.3903***	−0.5906***	0.1268
	(−3.79)	(−2.20)	(−3.07)	(−4.72)	(0.38)
N	393	193	200	208	185
adj. R^2	0.4194	0.4005	0.5411	0.5860	0.4435
F	9.3284	6.8305	11.2014	11.1039	7.6652

Source: the author.