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

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

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.

Suggested Citation

  • Huang, Xianhuan & Zhang, Yujia & Chan, Kam C. & Wang, Yao, 2024. "Digital tax enforcement and shadow banking of non-financial firms: Evidence from China's Golden Tax Project III," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324014089
    DOI: 10.1016/j.frl.2024.106379
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