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Tax uncertainty, cash holdings and corporate investment

Author

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  • Liu, Pengfei
  • Liu, Yan

Abstract

Based on panel data of Chinese non-financial listed companies from 2008 to 2023, this paper systematically examines the impact mechanism and action pathways of tax uncertainty on corporate investment activities. The study finds that tax uncertainty significantly inhibits corporate investment; tax uncertainty indirectly compresses investment scale by increasing the proportion of cash holdings; after grouping by firm size, the inhibitory effect of tax uncertainty on small firms' investment is significantly stronger than that on large firms, reflecting that small firms, due to stronger financing constraints and weaker policy adaptability, are more sensitive to fluctuations in the tax environment.

Suggested Citation

  • Liu, Pengfei & Liu, Yan, 2025. "Tax uncertainty, cash holdings and corporate investment," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015260
    DOI: 10.1016/j.frl.2025.108272
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    References listed on IDEAS

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