This paper investigates the impact of tax information supply on financial restatements using the rollout of China's Taxation Administration Information System III (CTAIS-3) as a natural experiment. The authors hypothesize that increased tax information transparency could either decrease or increase restatements. Employing a difference-in-differences approach, they find that firms in CTAIS-3 implemented areas experienced a significant reduction in restatements, robust across various financial reporting quality indicators. Information asymmetry is identified as a key mechanism, highlighting the government's role in improving financial disclosure quality.

Jian Zhang, Ningzhi Wang, Xinyu Zhu, Xiao Yi