Tax Uncertainty and Corporate Innovation

This study selected all Shanghai and Shenzhen A-share listed companies from 2008 to 2020 as the initial sample after considering the new corporate income tax system introduced in 2008. We exclude samples according to the following criteria: (1) companies with a negative denominator of the effective tax rate; (2) companies with an effective tax rate greater than 1 or less than 0; (3) special treatment companies and companies from the financial industry; and (4) samples with missing values. These eliminations restricted our final sample to 22,257 firm-year observations. To mitigate the impact of outliers, all continuous variables were winsorized at the 1st and 99th percentiles.
The company’s financial data are obtained from the China Securities Market and Accounting Research and Wind databases. When measuring enterprise innovation, patent data were downloaded from the official website of the State Patent Office (www.pss-system.gov.cn) using Python language programming. Depending on the applicant, we matched the company’s name and determined the classification of patents according to the International Patent Classification.