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How Does Environmental Protection Tax Affect Corporate Environmental Investment? Evidence from Chinese Listed Enterprises

Author

Listed:
  • Zhice Cheng

    (Research Center of the Central China for Economic and Social Development, Nanchang University, Nanchang 330031, China
    School of Economics and Management, Nanchang University, Nanchang 330031, China)

  • Xinyuan Chen

    (School of Economics and Management, Nanchang University, Nanchang 330031, China)

  • Huwei Wen

    (Research Center of the Central China for Economic and Social Development, Nanchang University, Nanchang 330031, China
    School of Economics and Management, Nanchang University, Nanchang 330031, China)

Abstract

This study mainly investigates the nexus of environmental protection tax and corporate environmental investment using a quasi-natural experiment and the difference-in-difference method. On the basis of 422 Chinese listed enterprises from 2012 to 2020, empirical results show that environmental protection tax has significantly reduced corporate environmental investment in China. In terms of mechanism, environmental protection tax inhibits corporate environmental investment through the financing constraints and the substitution effect of innovation investment. In terms of heterogeneity, environmental protection tax has a significant inhibitory effect on environmental investment for large firms, state-owned firms, and firms located in cities with strict regulations and economically developed cities. Environmental protection tax has a negative effect on corporate environmental investment, mainly through direct effect, innovation substitution effect, and financing inhibition effect.

Suggested Citation

  • Zhice Cheng & Xinyuan Chen & Huwei Wen, 2022. "How Does Environmental Protection Tax Affect Corporate Environmental Investment? Evidence from Chinese Listed Enterprises," Sustainability, MDPI, vol. 14(5), pages 1-22, March.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:5:p:2932-:d:762820
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    8. Ren, Yangqiu & Hu, Guoliu & Wan, Qing, 2024. "Environmental Protection tax and diversified transition of heavily polluting enterprises: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1570-1592.

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