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Environmental regulation and corporate tax avoidance:A quasi-natural experiments study based on China's new
Hongwei Yu1, Luqi Liao1, Shiyu Qu2
1Institute of Quality Development Strategy, Wuhan University, Wuhan, 430072, PR China.
Abstract:
Environmental regulation may lead to firm's behavior changes. This article explores the effects of environmental regulation on corporate tax avoidance activities. Using China's new Environmental Protection Law as a quasi-natural experiment, we construct a difference-in-difference-in-differences(DDD) strategy for estimation. We find that environmental regulation will significantly increase the corporate tax avoidance activities in polluting industries in highly regulated cities. We further examine the heterogeneous effects of political connection, and find that political connection may promote corporate tax avoidance activities under stringent environmental regulation. The promoting effects are mainly due to the political connection with local governments rather than with central government.
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