ENVIRONMENTAL REGULATORY CENTRALIZATION, ESG PERFORMANCE, AND CORPORATE TAX AVOIDANCE: EVIDENCE FROM POLLUTING INDUSTRIES IN CHINA

Abstract

This study evaluates the impact of China’s vertical environmental management reform on corporate tax avoidance. Using data on A-share listed firms in high-polluting industries from 2015 to 2023 and a staggered difference-in-differences approach, we find that the reform significantly increases tax avoidance. The effect is more pronounced among private firms and in regions with weaker environmental regulation. Firms with better ESG performance show weaker responses. The results highlight how changes in environmental enforcement shape corporate financial decisions and underscore the need to strengthen both regulatory independence and firm-level governance.