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From fee to tax: Can legal system strengthening enhance environmental performance?

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  • Ren, Zhongfu
  • Xu, Han

Abstract

This study examines the impact of legal system strengthening on corporate environmental performance following the implementation of the new environmental protection tax policy, utilizing data from China’s A-share listed companies (2010–2023). Difference-in-differences (DID) analysis reveals that legal system strengthening significantly enhances environmental performance. Heterogeneity analysis indicates that this effect is more pronounced in non-state-owned enterprises. Total factor productivity (TFP) exhibits a partial mediating effect between regulatory strengthening and corporate environmental performance. While carbon emission positively moderates this relationship. These findings offer new insights into how firms can effectively leverage legal system strengthening to improve environmental performance and provide evidence for policy formulation.

Suggested Citation

  • Ren, Zhongfu & Xu, Han, 2025. "From fee to tax: Can legal system strengthening enhance environmental performance?," Finance Research Letters, Elsevier, vol. 86(PF).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pf:s1544612325020549
    DOI: 10.1016/j.frl.2025.108800
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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