Does the Environmental Tax Reform Positively Impact Corporate Environmental Performance?

The environmental tax reform implemented in 2018 is an important initiative of Chinese tax reform, which is deemed a valuable opportunity to encourage firms to improve their environmental performance. This study empirically investigates the impact of the environmental tax reform on corporate environmental performance based on data from Chinese A-share listed firms with heavy pollution from 2016 to 2020 by the differences-in-differences method. It is found that the environmental tax reform can effectively improve corporate environmental performance, and the environmental supervision of local governments is an important channel to realize this. Heterogeneity tests show that the environmental tax reform better impacts the corporate environmental performance of non-state-owned enterprises and firms in western areas. This paper enriches the application scenarios of institutional theory, provides micro evidence for the impact of implementing the Environmental Protection Tax, and provides a decision-making basis for strengthening the environmental supervision of local governments, which has practical guidance significance in forcing corporations to modernize their green technology and realize sustainable economic growth.