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Do Tax Incentives Promote Corporate Green Investment?—Evidence from a Quasi-Natural Experiment Based on China’s Corporate Income Tax Reform

Author

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  • Daleng Xin

    (School of Economics, Shandong Normal University, Jinan 250358, China)

  • Yanzhen Yi

    (School of Economics, Shandong Normal University, Jinan 250358, China)

  • Lanjun Shen

    (School of Global Management, Semyung University, Jecheon 27136, Republic of Korea)

Abstract

It is essential for achieving green and sustainable economic development by using tax incentives to promote green investment. Using the data from the seventh, eighth, ninth, and tenth Chinese Private Enterprise Surveys (CPESs) conducted by the Private Enterprise Research Group and using China’s corporate income tax reform in 2008 as a quasi-natural experiment, this paper empirically analyses the effect of tax incentives on corporate green investment based on the difference-in-difference models. The research results show that tax incentives can significantly increase corporate green investment. The mechanism test shows that easing financing constraints is an important channel for tax incentives to promote corporate green investment. In addition, the role of tax incentives in promoting green investment varies depending on the type and location of the enterprise. Relatively speaking, tax incentives have a stronger effect in promoting green investment for corporates with low sales revenue, located in the eastern region, heavy pollution, and high innovation capability. By doing placebo tests and changing measurement methods of indicators for robustness tests, the conclusions of this paper are still valid. Therefore, the government should increase tax incentives to better promote corporate green investment.

Suggested Citation

  • Daleng Xin & Yanzhen Yi & Lanjun Shen, 2025. "Do Tax Incentives Promote Corporate Green Investment?—Evidence from a Quasi-Natural Experiment Based on China’s Corporate Income Tax Reform," Sustainability, MDPI, vol. 17(3), pages 1-25, January.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:3:p:1068-:d:1578899
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