Taxation and corporate investment efficiency in common prosperity

Abstract

We explore the impact of corporate tax redistribution on investment efficiency in the context of the common prosperity policy. Utilizing data from Chinese public companies (2011–2022), we empirically examine whether corporate tax redistribution significantly impacts investment efficiency, particularly underinvestment. We find that corporate tax redistribution affects investment efficiency through two channels: reducing corporate cash flow and lowering investment returns. This relationship is stronger in non-state-owned enterprises. It is also pronounced in firms with changes in share capital structure, CEO duality, directors and supervisors who do not hold positions in shareholder units, and the same beneficial owner who does not control multiple listed firms. The study offers new perspectives on the influence of corporate tax redistribution on investment decisions under the common prosperity strategy.