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The impact of the environmental tax reform on green M&A activities of heavily polluting enterprises

Author

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  • Zheng, Yulan
  • Qiu, Xingyu
  • Long, Houyin
  • Li, Yujie

Abstract

This paper examines the impact and underlying mechanisms of China’s environmental tax reform, specifically, the transition from pollution discharge fees to an environmental protection tax, on the green merger and acquisition activities of heavily polluting enterprises. Using a difference-in-differences model, we find that the policy significantly promotes firm’s green M&A. Mechanism analysis reveals that the environmental tax reform primarily drives green M&A through two channels: reducing operational costs and enhancing internal control. Heterogeneity tests indicate that the effect is more pronounced for firms located in provinces with low environmental efficiency, those with strong innovation capabilities, and state-owned enterprises. This study provides valuable policy insights for the government in fostering effective corporate mergers, promoting green industrial transformation, and advancing sustainable development.

Suggested Citation

  • Zheng, Yulan & Qiu, Xingyu & Long, Houyin & Li, Yujie, 2025. "The impact of the environmental tax reform on green M&A activities of heavily polluting enterprises," Finance Research Letters, Elsevier, vol. 86(PF).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pf:s1544612325021075
    DOI: 10.1016/j.frl.2025.108853
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    References listed on IDEAS

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