Digital tax enforcement and shadow banking of non-financial firms: Evidence from China's Golden Tax Project III

Xianhuan Huang, Yujia Zhang, Kam C. Chan and Yao Wang

Finance Research Letters, 2024, vol. 70, issue C

Abstract: Digital tax enforcement (DTE) is an important external monitoring and governance mechanism for firms. We leverage the pilot of China's Golden Tax Project III as a natural experiment of DTE to investigate its impact on non-financial firms’ shadow banking. Using a sample of Chinese firms from 2007 to 2022, we document that DTE restrains shadow banking activities of non-financial firms by improving corporate transparency and mitigating agency problems. Additional analyses suggest that the effect is more salient for firms in regions with weak financial supervision, low-quality media monitoring, low-quality auditor, or weak internal control.

Keywords: Digital tax enforcement; Shadow banking of non-financial firms; Information asymmetry; Golden Tax Project III (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324014089

DOI: 10.1016/j.frl.2024.106379

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