The influence of China Environmental Protection Tax Law on firm performance – evidence from stock markets

Yu He, Chuanhao Wen and Jia He

Applied Economics Letters, 2020, vol. 27, issue 13, 1044-1047

Abstract: This study examines the influence of China Environmental Protection Tax (EPT) Law on firm performance, which is proxied by stock prices. Using the event study methodology, we find that most sectors experience negative market reactions, indicating that the EPT Law will increase environmental costs and hurt firm performance. Firms’ political connections and fundamentals are related to the market reactions. The different impacts of political connections on market reactions have been detected between the two events related to the EPT Law. Our results are robust to diverse fixed effects and potential endogeneity issues.

Date: 2020
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DOI: 10.1080/13504851.2019.1659488

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