Green bond issuance and corporate tax aggressiveness

This paper investigates the effect of corporate green bond issuance on tax aggressiveness using data from Chinese A-share listed companies between 2012 and 2023. Employing a difference-in-differences (DID) analysis, the study finds that firms exhibit significantly lower tax aggressiveness following the issuance of green bonds. Mechanism analysis reveals that green bond issuance curbs tax avoidance through three primary channels: it offers direct economic incentives by lowering financing costs, imposes external monitoring pressure via signaling effects, and enhances internal compliance motivation through improved ESG performance. These mechanisms together form an integrated constraint framework characterized by economic rationality-market discipline-organizational ethics, jointly deterring aggressive tax behavior. Heterogeneity analysis shows that the effect is more pronounced among non-state-owned enterprises and firms located in China’s central and western regions. Overall, the findings of this study provide valuable insights for policymakers in the field of green finance to develop an integrated set of policy tools comprising cost incentives, market signals, and ethical guidance. Such a framework can help guide enterprises away from profit-driven tax avoidance, and toward a commitment to sustainable development, ultimately promoting the alignment of economic efficiency with social value.