Tax Incentives, Confidence, and Enterprise Innovation in Chinese Listed Companies

In this paper, we study the direct effect of tax incentives on enterprise innovation investment and the mediating effect of confidence on enterprise innovation investment using data from 3, 900 annual reports of listed companies in China from 2008 to 2020 for data mining, and combine this with sentiment analysis to measure the business confidence index. We find that tax incentives are significantly and positively related to enterprise innovation investment and tax incentives are significantly and positively related to business confidence. Business confidence plays a significant partial mediating role between tax incentives and enterprise innovation investment, and tax incentives boost confidence by alleviating internal financing constraints. This study provides empirical evidence to help the government develop strategies to activate the confidence of market players and boost market expectations.