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The impact of tax integrity on corporate innovation: evidence from China

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  • Dan Wu
  • Panpan Zheng

Abstract

This study analyzes the impact of enterprise integrity on corporate innovation from the perspective of the contract theory. We used the tax credit ratings of listed firms provided by China’s State Administration of Taxation from 2014 to 2017 to measure enterprise integrity. Our results suggest that enterprises with tax integrity have a higher intensity of research and development (R&D) investment than those without. In addition, institutional investors and financing constraints play an incomplete intermediary role between tax integrity and corporate innovation. The impact of tax integrity on corporate innovation is heterogenous; tax integrity has a more significant impact on state-owned enterprises, non-high-tech enterprises, and enterprises in areas with lower marketization levels. This study does not only complement the theoretical research on integrity and corporate innovation; it also provides empirical evidence for stakeholders to understand the economic consequences of integrity from the perspective of the contract theory.

Suggested Citation

  • Dan Wu & Panpan Zheng, 2023. "The impact of tax integrity on corporate innovation: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 55(45), pages 5303-5316, September.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:45:p:5303-5316
    DOI: 10.1080/00036846.2022.2138821
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