Regulatory effects of environmental protection tax law on corporate practices in China

Dan Xu and Cuihua Wu

Finance Research Letters, 2025, vol. 71, issue C

Abstract: This study focuses on the regulatory effects of China's Environmental Protection Tax Law (EPTL) on corporate practices. Furthermore, it examines the impact of this tax law on firm financial performance mediated by firm environmental, social, and governance (ESG) performance and firm innovation. Our findings indicate that the EPTL positively influences financial outcomes, with ESG and innovation as critical intermediaries. Recommendations include refining the EPTL by providing increased incentives for firms to adopt ESG practices and invest in innovation, fostering a stronger alignment between environmental legal frameworks and corporate behavior.

Keywords: Environmental protection tax law; Financial performance; Firm ESG; Firm innovation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014983

DOI: 10.1016/j.frl.2024.106469

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