IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v96y2024ipas105752192400499x.html
   My bibliography  Save this article

Impact of an increase in tax deductibility of R&D expenditure on firms' ESG: Evidence from China

Author

Listed:
  • Zeng, Jing
  • Ling, Wen
  • Hua, Min
  • Chan, Kam C.

Abstract

We investigate the impact of tax policy on firms' ESG performance. In 2016, China substantially raised firms' tax deductibility for research and development (R&D) expenditures (i.e., the R&D tax policy). Using a sample of Chinese A-share firms from 2009 to 2022 and a difference-in-differences research design, we find that the R&D tax policy significantly improves firms' ESG performance. These findings are robust to alternative ESG metrics and estimation methods. We also show that the R&D tax policy can lower financial constraints and promote green innovations in firms, which leads to better ESG performance. When a firm is younger or has lower profits, the impact of the R&D tax policy on ESG performance is more salient.

Suggested Citation

  • Zeng, Jing & Ling, Wen & Hua, Min & Chan, Kam C., 2024. "Impact of an increase in tax deductibility of R&D expenditure on firms' ESG: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s105752192400499x
    DOI: 10.1016/j.irfa.2024.103567
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S105752192400499X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2024.103567?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:96:y:2024:i:pa:s105752192400499x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.