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How does Environmental Protection Tax Law affect corporate investment preferences?

Author

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  • Zhang, Xin
  • Shi, Chenxiao

Abstract

This study examines the influence of implementing the Environmental Protection Tax Law on the investment choices of multinational corporations by analyzing data from China's A-share listed companies spanning the years 2006 to 2022. The enforcement of the Environmental Protection Tax Law can stimulate company investment in tangible business operations while curbing corporate financialization. The mechanism test illustrates that implementing the Environmental Protection Tax can impede business financialization by significantly increasing environmental and research and development spending. This article presents policy suggestions for effectively implementing environmental legislation, aggressively reducing firm financial risks, and promoting genuine economic growth.

Suggested Citation

  • Zhang, Xin & Shi, Chenxiao, 2025. "How does Environmental Protection Tax Law affect corporate investment preferences?," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015277
    DOI: 10.1016/j.frl.2024.106498
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    References listed on IDEAS

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