Does Tax Enforcement Improve Financial Reporting Quality—Based on the quasi-natural experiment of “The third stage of Golden tax”

Abstract

Abstract: Based on the sample of China's A-share listed companies from the 2011 to 2018 period, this paper takes tax-check system reform "The third stage of Golden tax" as quasi-natural experiment, discusses the corporate governance effect of tax enforcement, and uses difference-in-difference model to empirically test the effect of the third stage of Golden tax reform on financial reporting quality. It arrives at the conclusions as follows: First, the third stage of Golden tax reform significantly improved firms’ financial reporting quality. Second, the corporate governance effect of the third stage of Golden tax reform is more pronounced in companies with weaker governance, lower information transparency and higher financing demand. Third, from the perspective of the mechanism, the third stage of Golden tax reform significantly enhanced tax enforcement and reduced corporate tax avoidance.

Key words: tax enforcement, the third stage of Golden tax, financial reporting quality, corporate governance

CLC Number:

F230

WANG Xue-ping. Does Tax Enforcement Improve Financial Reporting Quality—Based on the quasi-natural experiment of “The third stage of Golden tax”[J]. Journal of Guizhou University of Finance and Economics, 2020(03): 49-60.

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