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Regulatory effects of environmental protection tax law on corporate practices in China

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  • Xu, Dan
  • Wu, Cuihua

Abstract

This study focuses on the regulatory effects of China's Environmental Protection Tax Law (EPTL) on corporate practices. Furthermore, it examines the impact of this tax law on firm financial performance mediated by firm environmental, social, and governance (ESG) performance and firm innovation. Our findings indicate that the EPTL positively influences financial outcomes, with ESG and innovation as critical intermediaries. Recommendations include refining the EPTL by providing increased incentives for firms to adopt ESG practices and invest in innovation, fostering a stronger alignment between environmental legal frameworks and corporate behavior.

Suggested Citation

  • Xu, Dan & Wu, Cuihua, 2025. "Regulatory effects of environmental protection tax law on corporate practices in China," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014983
    DOI: 10.1016/j.frl.2024.106469
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    References listed on IDEAS

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    5. He, Pinglin & Sun, Yulong & Niu, Hanlu & Long, Chengfeng & Li, Shufeng, 2021. "The long and short-term effects of environmental tax on energy efficiency: Perspective of OECD energy tax and vehicle traffic tax," Economic Modelling, Elsevier, vol. 97(C), pages 307-325.
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