Central environmental supervision and corporate tax strategies: Evidence from China's key pollutant-discharging units list

Ge Jin, Wanying Lv, Wenqiang Chen and Feiteng Lin

Energy Economics, 2025, vol. 149, issue C

Abstract: In this paper, we provide an economic theoretical framework for analyzing the impact of environmental regulation on corporate tax strategies. We utilize the implementation of China's key pollutant-discharging units list as a quasi-natural experiment, focusing on Chinese A-share listed companies on the Shanghai and Shenzhen stock exchanges to empirically examine the impact and mechanisms of direct central supervision on corporate tax strategies. Our findings suggest that central government environmental supervision significantly increases corporate tax avoidance. Mechanism tests suggest that financing constraints and performance pressure are two potential channels through which central supervision affects corporate tax behavior. Heterogeneity analysis shows that the impact of central supervision on corporate tax strategies is more pronounced among firms with higher management expenses, the absence of high-quality auditors, lower local fiscal pressure, and stronger local environmental governance. This study makes theoretical and empirical contributions to our understanding of the effects of environmental regulation on corporate tax planning.

Keywords: Central supervision; Environmental regulation; Tax avoidance; Financing pressure; Performance pressure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325005882

DOI: 10.1016/j.eneco.2025.108761

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