Abstract
Can the greening of the tax system truly drive high-quality development of enterprises? ESG, as an investment concept and evaluation criterion focusing on corporate sustainable development, is an essential tool for enterprises to practice high-quality economic development. Based on this, using China’s environmental protection tax reform in 2018 as a natural experiment, this paper examines the impact and transmission paths of environmental protection tax on enterprises’ ESG performance from the unique dual perspectives of external attention and internal decision-making, adopting a diference-in-differences (DID) approach. The study finds that, firstly, environmental protection tax significantly improves enterprises’ ESG levels through the internal level of green innovation and external public environmental concerns. Moreover, the level of internal governance and external analyst attention play a positive moderating role in this process. Secondly, the improvement effect of environmental protection tax on enterprises’ ESG performance is more significant for manufacturing enterprises, non-state-owned enterprises, financially resource-rich enterprises, and enterprises located in regions with higher economic growth, lower government-market linkage, and better legal environment. This research responds to the fundamental question of whether the greening of the tax system can truly promote high-quality development of enterprises, and provides valuable insight into how to further enhance the promoting role of environmental protection tax on enterprises’ ESG performance.
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Notes
The environmental protection tax reform implemented since 2018 generally refers to the original pollution discharge fee system. However, local governments are allowed to independently increase the collection standards for taxable pollutants within 10 times the minimum collection standard set by the central government for major pollutants. After the official implementation of the environmental protection tax, some provinces and cities have increased the collection standards for taxable pollutants, which means an increase in the environmental protection tax rate. Meanwhile, other provinces and cities have kept the environmental protection tax rate unchanged from the previous pollutant discharge fee standards, following the principle of “tax burden remains the same”.
Environmental regulations in China can be categorized into three types: command and control regulations, market-based environmental regulations, and public participation regulations.
In order to address the challenges of cross-regional environmental governance and strengthen the national ecological environment supervision capacity, China has established a regional environmental inspection system. This system began with the establishment of the “Regional Environmental supervision Center”. With the adoption of the “Environmental Protection Inspection Plan (Trial)” in 2015, the “Regional Environmental supervision Center” was adjusted to the “Regional Environmental Inspection Bureau”, thus clearly establishing an environmental inspection mechanism.
The definition of heavily-polluting industries is based on the criteria provided by the China Securities Regulatory Commission's revised “Guidelines for Industry Classification of listed companies” in 2012 and the Ministry of Environmental Protection's published “List of Classification and Management of Environmental Protection Inspection Industries for listed companies”.
The marketization index constructed by Fan Gang and Wang Xiaolu et al. consists of five components: government-market relationship, non-state economic development, degree of product market development, degree of factor market development, and degree of development of market intermediary organizations and legal system environment.
Shareholder aspect includes the proportion of shares held by the largest shareholder, the ownership balance index, property rights nature, and institutional investor shareholding. The board of directors aspect includes board independence, board size, and whether the chairman and CEO positions are combined. The incentive mechanism aspect includes the proportion of management's equity holdings, and the compensation of the top three management members.
Analysts' attention reflects the number of analysts (or teams) that have tracked and analyzed the company within a year. One team is considered as one unit, and its individual members are not counted separately.
Research reports' attention refers to the number of research reports that have tracked and analyzed the company within a year.
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Acknowledgements
This research was supported by the Major Project of the National Social Science Fund of China (20&ZD095), the Yunnan Provincial Workstation of Philosophy and Social Sciences Experts (2021GZZH01) , Humanities and Social Science Project of the Ministry of Education—Tracking and Evaluation of Green Development Performance of Ecological Products on the Improvement Path in the Middle and Lower reaches of the Yangtze River (23A10673002), Sichuan Province philosophy and social science key project (SCJJ23ND46) and the Innovation Team for Green Development in the Upper Yangtze River at Yunnan University. The authors sincerely thank the reviewers and editors.
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Lin, C., Lu, S., Su, X. et al. Can the greening of the tax system improve enterprises’ ESG performance? Evidence from China. Econ Change Restruct 57, 127 (2024). https://doi.org/10.1007/s10644-024-09687-w
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DOI: https://doi.org/10.1007/s10644-024-09687-w