The impact of fiscal transparency on entrepreneurial activity:evidence from Chinese cities

Fiscal transparency, known for its remarkable effect on reshaping government function and its relationship with citizens, also plays an important role in helping government to encourage more entrepreneurship. This paper argues that fiscal transparency can exert nonlinear influence on entrepreneurship, namely first inhibiting and then promoting. Firstly, we systematically expound the effect of fiscal transparency on entrepreneurship at the theoretical level. And then we conduct empirical analysis basing on data from 281 prefecture-level cities in China between 2013-2022 and confirm the nonlinear relation between fiscal transparency and entrepreneurship. Through further calculation we find that the inflection point occurs at 0.6, that is, government discloses nearly 60% of the fiscal information, which is robust under multiple identification strategies and robustness tests. Our study enriches the institutional factors in entrepreneurship theory and expands the theoretical boundary of fiscal transparency research by helping unpack the complex relationship between fiscal transparency, corruption and entrepreneurship.