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

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 an...

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Bibliographic Details
Published in:Applied economics letters 2020-07, Vol.27 (13), p.1044-1047
Main Authors: He, Yu, Wen, Chuanhao, He, Jia
Format: Article
Language:English
Subjects:
Economic analysis
Economic theory
Economics
Environmental protection
Environmental Protection Tax Law
Law
market reaction
Organizational performance
political connection
Prices
Securities markets
Stock exchanges
stock markets
Taxation
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Summary: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.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2019.1659488