Does the supply of tax information affect financial restatements? Evidence from the launch of Taxation Administration Information System III in China

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