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Tax Enforcement Independence and Corporate Financial Asset Holdings: Quasinatural Experimental Evidence From China

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Listed:
  • Chuanlin Shao
  • Nan Sun
  • Xiaofan Li
  • Weiwei Xiao

Abstract

Existing research has paid little attention to the impact of tax enforcement independence on corporate financial asset allocation. To fill this gap, we use the merger of the State Tax Bureau and Local Tax Bureau as an exogenous shock, and our DID analysis shows that greater tax enforcement independence reduces corporate financial asset holdings. The mechanism analysis shows that the effect is primarily driven by intensified liquidity constraints and enhanced corporate information disclosure. Moreover, the effect is stronger for firms with greater financing constraints and weaker corporate governance, particularly affecting short‐term financial assets.

Suggested Citation

  • Chuanlin Shao & Nan Sun & Xiaofan Li & Weiwei Xiao, 2025. "Tax Enforcement Independence and Corporate Financial Asset Holdings: Quasinatural Experimental Evidence From China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(8), pages 4138-4154, December.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:8:p:4138-4154
    DOI: 10.1002/mde.70006
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