Navigating Environmental Tax Challenges: Business Strategies for Chinese Firms Sustainable Growth

Xiaomin Lyu () and Qiongwen Zhang
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Xiaomin Lyu: Department of Economics & Management, Beijing Information Science and Technology University, Beijing 100192, China
Qiongwen Zhang: Department of Economics & Management, Beijing Information Science and Technology University, Beijing 100192, China

Sustainability, 2024, vol. 16, issue 17, 1-21

Abstract: The environmental tax burden on Chinese firms is continuously increasing. How do firms respond to environmental tax pressure to achieve sustainability? This study aims to investigate whether environmental tax burden affects firms’ total factor productivity (TFP), an important indicator of sustainable development. Utilizing panel data of Chinese A-share listed firms from 2018–2022, we find that environmental tax burden positively impacts Chinese firms’ TFP. Interestingly, the impact of environmental tax burden on TFP is mediated through fixed asset investment rather than technological innovation. This indicates that in the short term, the pressure of environmental tax on Chinese firms has not triggered the Porter Effect. Additionally, this effect is stronger in larger firms, non-state-owned firms, and sample firms with weaker financial constraints and lower transaction costs. Therefore, different firms can flexibly adopt different business strategies to achieve sustainable development when facing environmental tax burden.

Keywords: environmental tax burden; total factor productivity; technological innovation; fixed assets investment (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: View citations in EconPapers (1)

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