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| Jin Lv, Xinyu Ren, Wendy (Hong) Wang and Rufen Zheng |
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| ''Fiscal centralization and corporate leverage in emerging markets: Evidence from the merger of tax bureaus in China'' |
| ( 2025, Vol. 45 No.4 ) |
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| This study investigates how fiscal centralization influences corporate leverage in China by exploiting the 2016 consolidation of the National Tax Bureau (NTB) and Local Tax Bureaus (LTBs). Using a difference-in-differences design, we find that affected firms—local enterprises newly subject to NTB oversight—cut leverage by 0.107 standard deviations relative to unaffected peers. The reduction is larger for firms that maintained close ties with local governments before the reform, indicating that centralization improves corporate governance and mitigates center–local agency frictions. The results offer policy guidance for China's ongoing deleveraging initiative. |
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| Keywords: Fiscal centralization; Tax enforcement; Corporate governance; Corporate structure; Emerging markets |
JEL: G3 - Corporate Finance and Governance: General
H7 - State and Local Government; Intergovernmental Relations: General |
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| Manuscript Received : Jun 18 2025 | | Manuscript Accepted : Dec 30 2025 |
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