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Environmental regulation and corporate tax avoidance—Evidence from China

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  • Xiaokang Yang
  • Junbing Xu
  • Minling Zhu
  • Yinglong Yang

Abstract

In this study, we used a difference-in-difference (DID) approach to analyze the effect of environmental regulation on corporate tax avoidance behavior based on China’s carbon emissions trading pilot policy of 2013. Our findings were as follows: (1) Environmental regulation has led companies to adopt further tax evasion behaviors. Furthermore, the core conclusion was confirmed after a series of robust and endogenous tests, such as parallel trends and PSM-DID (propensity score matching-difference-in-difference). (2) Environmental regulations increase tax avoidance activities by reducing corporate cash flows. (3) The influence of environmental regulation on firm tax evasion is highly pronounced among non-state-owned enterprises, big-scale enterprises, and enterprises with a high degree of industry competition.

Suggested Citation

  • Xiaokang Yang & Junbing Xu & Minling Zhu & Yinglong Yang, 2022. "Environmental regulation and corporate tax avoidance—Evidence from China," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-12, January.
    • Handle: RePEc:plo:pone00:0261037
    DOI: 10.1371/journal.pone.0261037
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    References listed on IDEAS

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    Cited by:

    1. Xiaowei Ding & Darko B. Vukovic & Riad Shams & Natalia Vukovic, 2025. "Does air pollution affect corporate shareholder responsibility performance?: Analysis of regression discontinuity design based on the "Qinling-Huaihe" line," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(2), pages 4083-4116, February.
    2. Tian, Haowen & Wang, Junkai & Wu, Sirui, 2024. "Beyond the target: The spillover effect of shareholder activism on corporate tax avoidance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 96(C).

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