arbiter
JournalsAccount

Tax Enforcement Independence and Firm Related‐Party Transactions: Evidence From a Quasi‐Natural Experiment

Xiaoqi Chen & Yutong Sun

Australian Accounting Review2025https://doi.org/10.1111/auar.70011article
AJG 2ABDC B
Weight
0.44

Abstract

Government intervention in tax authorities, which can compromise enforcement independence and undermine its governance role, remains a common challenge across both developed and emerging economies. This study examines how enhanced tax enforcement independence affects firm‐level related‐party transactions (RPTs) by leveraging China's State Tax Bureaus and Local Tax Bureaus merger as a quasi‐natural experiment. We find that greater tax enforcement independence significantly reduces RPTs, particularly abnormal ones. The effect is more pronounced in regions with lax enforcement and underdeveloped markets, and firms with weaker governance environments. The strengthening of enforcement power by tax authorities is an important influencing mechanism. Furthermore, the merger can filter out improper RPTs, thereby improving firms’ future financial performance and market value. Overall, our findings highlight the critical importance of safeguarding tax enforcement independence for corporate governance worldwide, providing valuable insights for tax system reform in various countries.

3 citations

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1111/auar.70011

Or copy a formatted citation

@article{xiaoqi2025,
  title        = {{Tax Enforcement Independence and Firm Related‐Party Transactions: Evidence From a Quasi‐Natural Experiment}},
  author       = {Xiaoqi Chen & Yutong Sun},
  journal      = {Australian Accounting Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1111/auar.70011},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Tax Enforcement Independence and Firm Related‐Party Transactions: Evidence From a Quasi‐Natural Experiment

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.44

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.32 × 0.4 = 0.13
M · momentum0.57 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.