Social Insurance Contributions and Firm Leverage:Can Cost Reduction Help De-leverage?
Social insurance contributions constitute a significant component of employment costs,exerting a profound impact on enterprise operations.This study explores the consequences of reducing social insurance contributions on firm leverage and its influencing mechanisms,utilizing data from non-financial listed companies spanning the period from 2008 to 2019.The results show that a reduction in social insurance contributions significantly decreases firm leverage,with a more pronounced effect observed in firms characterized by high labor intensity,severe financing constraints,and during recessionary periods.Mechanism tests expose liquidity constraints and innovation as the primary driving forces behind this effect.Furthermore,the effect of reducing social insurance contributions varies concerning debt maturity,resulting in a notable reduction in short-term leverage while showing no significant effect on long-term leverage.This study contributes to the literature in the emerging field of"labor and finance"and provides empirical support for reform policies aimed at reducing social insurance contributions and facilitating de-leveraging.
social insurance contributionsfirm leverageliquidity constraintinnovation-driven
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