{"title":"Environmental protection tax law and corporate financial fraud: Evidence from listed firms in China","authors":"","doi":"10.1016/j.irfa.2024.103537","DOIUrl":null,"url":null,"abstract":"<div><p>Taxation constitutes a fundamental element in the administration of a country. The environmental protection tax, an essential green tax system in China, offers enhanced flexibility compared to regulatory measures predicated on administrative orders. It performs a crucial and substantial role in enabling organizations to progress toward superior growth. This research endeavor aims to analyze the impact of green taxation on corporate financial misconduct. Data about China's A-share listed companies from 2011 to 2022 is analyzed to achieve this. A difference-in-differences model is developed by integrating the 2018 Environmental Protection Tax Law implementation into a quasi-natural experiment. Implementing the Environmental Protection Tax Law reduces the quantity and propensity of financial fraud within organizations. The results of the mechanism test suggest that the enforcement of the Environmental Protection Tax Law may hinder the involvement of businesses in financial misconduct through the promotion of information transparency and the strengthening of managerial pressure. The effect of enforcing the Environmental Protection Tax Law on mitigating corporate financial fraud is more significant for organizations that have adopted equity incentives for their CEOs and have greater degrees of digitization, according to a heterogeneity analysis.</p></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":null,"pages":null},"PeriodicalIF":7.5000,"publicationDate":"2024-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1057521924004691/pdfft?md5=708aff9e70521b0c0505a26e10e0b79b&pid=1-s2.0-S1057521924004691-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Financial Analysis","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1057521924004691","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Taxation constitutes a fundamental element in the administration of a country. The environmental protection tax, an essential green tax system in China, offers enhanced flexibility compared to regulatory measures predicated on administrative orders. It performs a crucial and substantial role in enabling organizations to progress toward superior growth. This research endeavor aims to analyze the impact of green taxation on corporate financial misconduct. Data about China's A-share listed companies from 2011 to 2022 is analyzed to achieve this. A difference-in-differences model is developed by integrating the 2018 Environmental Protection Tax Law implementation into a quasi-natural experiment. Implementing the Environmental Protection Tax Law reduces the quantity and propensity of financial fraud within organizations. The results of the mechanism test suggest that the enforcement of the Environmental Protection Tax Law may hinder the involvement of businesses in financial misconduct through the promotion of information transparency and the strengthening of managerial pressure. The effect of enforcing the Environmental Protection Tax Law on mitigating corporate financial fraud is more significant for organizations that have adopted equity incentives for their CEOs and have greater degrees of digitization, according to a heterogeneity analysis.
期刊介绍:
The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.