Air pollution and corporate tax avoidance

Yaohua Qin () and He Xiao ()
Additional contact information
Yaohua Qin: Beijing Normal University-Hong Kong Baptist University United International College
He Xiao: Beijing Normal University-Hong Kong Baptist University United International College

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 1, No 13, 475-503

Abstract: Abstract This study investigates the impact of air pollution on corporate tax avoidance aggressiveness. The results indicate that firms in cities with severe air pollution tend to engage in less tax avoidance activities and pay a higher corporate effective tax rate (ETR). Furthermore, the positive impact of air pollution on corporate ETR is less pronounced for firms with big four auditors and entrenched CEOs. The effect is more noticeable for state-owned firms. These empirical findings are robust to a generalized method of moments test, two-stage least squares tests that use thermal inversions as an instrumental variable, and regression discontinuity tests exploiting the China Huai River policy. This study contends that the stronger governmental tax pressures and external monitoring mechanism associated with highly polluting areas mitigates corporate tax avoidance efforts. In addition, the study’s findings are robust to the alternative proxies for air pollution and tax avoidance in the model, and the exclusion of first-tier cities.

Keywords: Air pollution; Tax avoidance; Corporate governance (search for similar items in EconPapers)
JEL-codes: E62 G30 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11156-024-01311-2 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:rqfnac:v:64:y:2025:i:1:d:10.1007_s11156-024-01311-2

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-024-01311-2

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().