Tax Information Disclosure and Access to Debt Finance

57 Pages Posted: 3 Sep 2024

See all articles by Xipei Hou

Xipei Hou

affiliation not provided to SSRN

Yinjie (Victor) Shen

Cleveland State University - Monte Ahuja College of Business

Jing Xing

Antai College of Economics & Management, Shanghai Jiao Tong University

Abstract

We examine whether corporate tax information disclosure affects firms’ access to debt finance, utilizing the disclosure of top-rated corporate taxpayers in China in 2015 as a quasi-natural experiment. We find that in the absence of formal credit ratings, the disclosure increases top-rated firms’ access to bank loans. Top-rated firms face lower demands for collateral and enjoy more diversified lender bases since the taxpayer rating disclosure. We demonstrate that the disclosure enhances top-rated firms' access to bank loans by reducing banks’ perceptions of firm risks related to tax uncertainty, signaling the degree of agency problems, and promoting information transparency. The top taxpayer rating’s positive impact on access to bank loans is also larger for firms facing weaker bank monitoring. Our study shows that tax information disclosure can influence firms’ access to external finance, which is particularly useful in developing countries where firms lack formal credit ratings.

Keywords: tax information disclosure, bank loans, tax uncertainty, Information transparency, Corporate Governance

Suggested Citation

Hou, Xipei and Shen, Yinjie (Victor) and Xing, Jing, Tax Information Disclosure and Access to Debt Finance. Available at SSRN: https://ssrn.com/abstract=4945430 or http://dx.doi.org/10.2139/ssrn.4945430

Xipei Hou

affiliation not provided to SSRN ( email )

No Address Available

Yinjie (Victor) Shen

Cleveland State University - Monte Ahuja College of Business ( email )

Jing Xing (Contact Author)

Antai College of Economics & Management, Shanghai Jiao Tong University ( email )

1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China
86 21 52301040 (Phone)

HOME PAGE: http://www.acem.sjtu.edu.cn/en/faculty/xingjing.html

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