Tax neutrality and digital transformation of private enterprises: From the perspective of human capital structure adjustment

Jiezheng Zhou, Xuexin Liu and Zhe Wang

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: Private firms are increasingly adopting digital transformation as a critical future development trend. Examining the factors that promote business digital transformation through the lens of policy instruments is crucial. Using data from A-share nonfinancial private listed companies from 2007 to 2021, this study empirically examines the impact of tax neutrality on the digital transformation of private organizations and its mechanism. Tax neutrality has been shown to significantly improve the digital transformation of private businesses, even after accounting for endogeneity and under numerous robustness tests. Tax neutrality aids private firms' digital transformation by improving human capital structure, boosting employee education, and increasing the number of nonroutine, highly trained personnel. It also has a greater impact on promoting the digital transformation of private enterprises in regions with higher levels of marketization, fiercer industry competition, and more severe financing constraints. Furthermore, this study demonstrates an interacting relationship between tax neutrality and government subsidies. The findings build on prior research on the factors influencing digital transformation in private enterprises. They also confirm the positive impact of tax neutrality and contribute to studying how tax policies affect private enterprises' microeconomic behavior.

Keywords: Tax neutrality; Digital transformation; Human capital structure; Private enterprises (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s105752192500287x

DOI: 10.1016/j.irfa.2025.104200

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