Applying China’s A-share listed companies from 2007 to 2018 as the research sample, this paper empirically examines the impact of tax haven investment on annual report restatement. It also revels the influencing channel from the perspective of information asymmetry and agency cost, and explores the governance mechanism. The results show that listed companies with tax haven investment are more likely to occur annual report restatement. After controlling for other factors, the annual report restatement probability of the tax haven direct investment company is more than 15% higher than that of the non-tax haven direct investment company. This positive relationship continues to hold after conducting a series of robustness tests. By analyzing the influencing channel, it is found that tax haven investment decreases the firm’s information transparency, increases the firm’s agency cost, and further increases the likelihood of annual report restatement. Further study shows that this positive correlation is stronger for the bad news restatement and supplementary restatement. Tax haven investment also increases the areas and fiscal years involved in the restatement. Good internal control and external analyst coverage can play corporate governance roles, alleviating the impact of tax haven investment on annual report restatement.

This paper is theoretically helpful in deeply understanding the impact of firms’ foreign investment behavior on the quality of information disclosure. It enriches the research on the influencing factors of financial report restatement of China’s listed companies, and provides a useful supplement to the research literature on the economic consequences of direct investment in tax havens. The existing literature mainly examines the economic consequences of direct investment in tax havens from the perspectives of macroeconomic impact, tax avoidance effect, firm value, and audit fees, while this paper expands the research perspective in this filed by exploring annual report restatement. In addition, this paper provides a theoretical explanation of the impact of tax haven investment on annual report restatement based on the perspective of information asymmetry and agency cost, and reveals the governance effect of internal control and analyst attention. Finally, in practice, the findings provide useful implications for improving the supervision and governance of the tax haven investment of listed companies and improving the information disclosure quality of listed companies.