Flexible tax regime and corporate M&As in China

Ruoyu Chen, Xingyu Wang, Guoqing Wang and Shuoshi Li

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: Trickle-down theory suggests that a flexible tax regime for the corporate sector can generate broader economic benefits. Corporate mergers and acquisitions (M&A), which are critical to market competition and corporate growth, are significantly affected by tax regimes. Using data on the Chinese listed companies from 2009 to 2022, we construct a PSM-DID model and empirically test the effects of a flexible tax regime/policy on corporate M&As. The findings show that a flexible regime can promote M&A activity by enhancing corporate social reputation and easing financing constraints. Additionally, this effect is more significant in firms with a non-state ownership majority, efficient board governance, chairman-CEO separation, and more independent directors.

Keywords: Service-oriented government; Flexible tax regime; Corporate mergers and acquisitions; Corporate social reputation; Financing constraints (search for similar items in EconPapers)
JEL-codes: G34 H25 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004174

DOI: 10.1016/j.iref.2025.104254

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