The Impact of Environmental Protection Tax on High-Quality Enterprise Development: Evidence from China

Yanxiang Li and Jinyuan Liu ()
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Yanxiang Li: South China Agricultural University, School of Public Administration
Jinyuan Liu: Hainan University, School of Marxism

A chapter in Proceedings of the 2026 5th International Conference on Big Data Economy and Digital Management (BDEDM 2026), 2026, pp 91-111 from Springer

Abstract: Abstract This study investigates the impact of China’s Environmental Protection Tax (EPT), implemented in 2018 as a quasi-natural experiment replacing the pollution discharge fee, on high-quality enterprise development. Utilizing a difference-in-differences (DID) model with panel data from listed companies on the Shanghai and Shenzhen stock exchanges (2015-2023), the research focuses on heavily polluting firms as the treatment group. The findings reveal that the EPT significantly promotes enterprise high-quality development, proxied by total factor productivity (TFP_LP), despite potential short-term cost increases. This positive effect operates primarily through a synergistic triple mechanism: enhanced green innovation, improved ESG (Environmental, Social, and Governance) performance, and the suppression of managerial short-termism. Heterogeneity analysis indicates that the positive impact is more pronounced for large enterprises and state-owned enterprises (SOEs), while small and medium-sized enterprises (SMEs) and non-SOEs face greater transformation challenges due to resource constraints and market pressures. The results support the Porter Hypothesis, demonstrating that environmental regulation can stimulate innovation and efficiency gains. The study concludes with policy recommendations for differentiated tax design, strengthened ESG incentives, optimized corporate governance, and coordinated policy support systems to foster enterprise transformation towards high-quality development.

Keywords: Environmental Protection Tax; High-Quality Enterprise Development; Green Innovation; ESG Performance; Managerial Short-Termism (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-94-6239-640-1_9

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