Environmental Protection Tax (EPT) and Its Influence on Firms’ Financial Health and Innovation Capabilities: Evidence from Chinese Listed Companies

ErShang Tian and Sung Ook Park ()
Additional contact information
ErShang Tian: Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Republic of Korea
Sung Ook Park: Department of Accounting and Taxation, School of Management, Kyung Hee University, Seoul 02447, Republic of Korea

Sustainability, 2024, vol. 16, issue 23, 1-16

Abstract: This study examines the impact of the environmental protection tax (EPT) on the liquidity and green technological innovation of listed companies in China from 2013 to 2023. Using a difference-in-differences (DID) approach, we analyze the short-term financial consequences of the EPT, focusing on liquidity ratios while also examining its effects on innovation through research and development investments. The results suggest that the EPT significantly reduces corporate liquidity, particularly in industries with high environmental compliance costs, thereby placing financial pressure on firms. Although the EPT stimulates innovation, the inherent time lag in realizing financial returns from R&D investments exacerbates short-term liquidity problems. This research offers important insights for policymakers seeking to balance sustainability goals with corporate financial health.

Keywords: environmental protection tax (EPT); corporate liquidity; difference-in-differences (DID); R&D investment; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/16/23/10585/pdf (application/pdf)
https://www.mdpi.com/2071-1050/16/23/10585/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:16:y:2024:i:23:p:10585-:d:1535527

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().