Can environmental tax bring strong porter effect? Evidence from Chinese listed companies

Abstract

Existing researches verify Porter hypothesis mainly through one of its core establishment paths, innovation compensation, but ignore the other one, rst-mover advantage. To further clarify the mechanism of Porter hypothesis, this paper considers both paths and further distinguishes between environmental R&D and nonenvironmental R&D. Based on the principle of the smooth transition of "charge to tax" in China, this paper, taking Chinese A-share listed companies that have disclosed environmental R&D from 2008 to 2017 as sample and predicting environmental tax by pollution charge, analyses the relationship between environmental tax and rm performance and the transmission mechanism between them. Our results show that environmental tax can improve rm performance and this in uence remains in long term. After introducing instrument variable (IV) to deal with endogeneity and conducting a series of robustness tests, we nd that the relationship between environmental tax and rm performance is robust causality. Furthermore, using mediating effect model to analyse the transmission mechanism, we prove that environmental tax can affect rm performance through innovation compensation and rst-mover advantage, which con rms the two core paths of Porter hypothesis.This study reveals the micro mechanism of environmental tax on rm performance, provides evidence from China to support strong Porter hypothesis, and helps guide environmental tax reform and corporate green strategy management.

The synergistic effect of carbon performance and technological innovation on corporate financial performance

“…In other words, both carbon performance and technological innovation are driving factors of corporate financial performance. The finding of the impact of technological innovation on financial performance is consistent with most researchers as discussed in the literature review ( Yeguang and Bo, 2018 ; Tariq et al, 2019 ; Yuan and Guangpei, 2021 ; Lei et al, 2022 ). But only few studies focus on empirical research on the relation between carbon performance and financial performance.…”

“…From the perspective of sustainable development of enterprises, the resource-based view doctrine proposes that technological innovation in enterprises is one of the most precious resources that can improve the core competitiveness and can bring differentiation of products or services, such as lower cost, higher quality or enable enterprises to gain competitive advantage in the market, and ultimately enhance enterprise value. At the same time, technological innovation brings unique resources to firms, which are often heterogeneous and difficult to replicate among firms, providing an irreplaceable advantage for firms’ competition ( Yuan and Guangpei, 2021 ; Lei et al, 2022 ). According to the signaling theory, investors have more confidence and higher expected value for the future operation of enterprises with large investment in technological innovation.…”

Environmental taxation: Contribution to sustainable development and AI prospects

“…The essence and experience of applying environmental taxation are considered in the works of Lei et al (2022), Liu et al (2022), Matti et al (2022), Zhao et al (2022). But the contribution of environmental taxation to the sustainable development of the ecological economy has not been sufficiently studied and defined, which is a gap in the literature.…”

The impact of environmental taxes on economic benefits and technology innovation input of heavily polluting industries in China

“…In other words, the "innovation compensation" effect of environmental regulations offsets the cost of environmental regulation compliance (Qiu et al, 2018) and increases enterprise productivity and performance (Hamamoto, 2006). In addition, when the green technologies mastered by these enterprises are mature, they will also have a first-mover advantage (Lei et al, 2022). The market competitiveness of technologically upgraded enterprises will be further strengthened in the future, resulting in the growth of enterprise economic benefits.…”

“…Previous studies have assessed the potential for beneficial effects of environmental taxes on economic growth and technological innovation input in China, with some scholars proposing positive benefits and others suggesting no or even negative benefits. First, Lei et al (2022), Abdullah andMorley, 2014, andWalid Oueslati, (2014) reported a causal relationship between environmental tax and enterprise performance. Early studies suggested a positive relationship between environmental tax and economic growth.…”