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Environmental tax and highly polluting firms' green transformation: Evidence from green mergers and acquisitions

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  • Hu, Jun
  • Fang, Qi
  • Wu, Huiying

Abstract

Taking China's Environmental Protection Tax Law, implemented in 2018, as an exogenous shock, this study investigates the effect of an environmental tax on firms' green transformation behaviors. Our baseline results show that this environmental tax policy has a positive impact on promoting highly polluting firms' green mergers and acquisitions (M&As). Heterogeneity analyses show that the effect of the environmental tax on green M&As is moderated by firm characteristics (state ownership, innovation capacity, and reputation), industry ones (competition and barriers to entry), and regional ones (legal system strength, environmental pollution severity, and pollution tax rates). Finally, we find that the capital market responds more positively to green M&As in highly polluting firms after the implementation of the environmental tax. This study has important policy implications, providing empirical evidence that may be useful for corporate green transformation.

Suggested Citation

  • Hu, Jun & Fang, Qi & Wu, Huiying, 2023. "Environmental tax and highly polluting firms' green transformation: Evidence from green mergers and acquisitions," Energy Economics, Elsevier, vol. 127(PB).
    • Handle: RePEc:eee:eneeco:v:127:y:2023:i:pb:s0140988323005443
    DOI: 10.1016/j.eneco.2023.107046
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    Cited by:

    1. Li, Fengzuo & Na, Pengjie & Wang, Xiaolan & Li, Xinyu, 2024. "Environmental protection taxes, audit fees and corporate ESG performance," Finance Research Letters, Elsevier, vol. 69(PA).
    2. Zhang, Bing-bing & Wang, Yuan & Chen, Yue & Zhou, Junting, 2024. "Digital transformation by firms and the cleanliness of China's export products," Energy Economics, Elsevier, vol. 134(C).
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    4. Wuxin Zhang & Haiying Pan, 2024. "Pursuing Cleaner Skies: A Study on the Impact of China’s Environmental Protection Tax Law on Haze Pollution," Sustainability, MDPI, vol. 16(24), pages 1-23, December.
    5. HIGASHIDA Keisaku & OKOSHI Hirofumi, 2024. "Together or Apart? Eco-friendly location under fiscal competition," Discussion papers 24086, Research Institute of Economy, Trade and Industry (RIETI).

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