Do Tax Incentives Promote Corporate Green Investment?—Evidence from a Quasi-Natural Experiment Based on China’s Corporate Income Tax Reform

Zeng S., Ji M., Huang X.

Xue G., Cai Y., Zhang Y.

Hu L., Chen S.

Sun L., Luo K., Zhou C., Yan J.

Tao Z., Chao J.

Zeng J., Ling W., Hua M., Chan K.C.

Han X., Cai Q.

Using China's A-share listed companies from 2008 to 2020, this paper empirically investigates the relationship between environmental regulation and corporate environmental investment, and the moderating effect of green credit on this relationship. The paper finds that environmental regulation effectively fosters corporate environmental investment and that green credit positively moderates this relationship. Robustness testing confirms that this conclusion is valid. Further analyses reveal that the efficacy of environmental regulation varies based on the industry characteristics of the company, the location of the company, and the type of property rights it possesses. The effect is more significant for heavily polluting companies, companies in the central and western regions, and non-state-owned companies than for companies of other natures. This paper presents empirical support for assessing the efficiency of environmental regulation, adds a green credit perspective to the mechanism through which macro policy influences corporate behavior, and finally puts forward some suggestions for optimizing China's environmental regulation policies.

Huang X., Hu X., Huang B.

This article will analyze the incentive effect of the value-added tax rate reduction policy on enterprise innovation from the perspective of enterprise quality management. The research results indicate that: (1) the reduction of value-added tax rate has an incentive effect on the innovation activities of enterprises; (2) There is a positive moderating effect of enterprise quality management on the reduction of value-added tax rate and the innovation and research and development activities of enterprises; (3) The reduction of value-added tax rate has a more significant incentive effect on innovation in the eastern region of China, state-owned enterprises, and relatively larger enterprises.

Javeed S.A., Latief R., Cai X., Ong T.S.

Lu C., Zhu T., Xia X., Zhao Z., Zhao Y.

Corporate green investments are fundamental to environmental governance. However, studies have mostly focused on the impact of macro factors on green investment, while neglecting micro factors. This study explores the impact of common institutional ownership on corporate green investments. An ordinary least squares model is used to analyse data from A-share listed companies in heavily polluting industries from the Shanghai and Shenzhen Stock Exchanges. The results show that the proportion of green investments in enterprises with common institutional ownership increases, on average, by 0.045%. Importantly, the larger the number of common institutional investors and the higher their shareholding is, the higher the proportion of green investment will be. Mechanism tests show that the effect of common institutional investors on green investments is more pronounced for companies that are exposed to higher environmental risks and have fewer resources to implement green investments. Furthermore, a cross-sectional analysis finds that the effects of common institutional ownership are stronger for firms in post-green credit guidelines, industries with low green investments, and state-owned enterprises. Moreover, the effects are more pronounced for firms with common institutional investors who are stable and have a higher level of exit threat. Finally, common institutional ownership significantly enhances green innovation. This study advances research on the factors influencing corporate green investments and has important implications for emerging markets for enhancing corporate environmental protection and environmental governance.

Tian J., Sun S., Cao W., Bu D., Xue R.

This paper systematically examines the impact of green credit regulation on the efficiency of corporate green investment. The results show that green credit policy significantly decreases green investment efficiency for heavily polluting firms. This is further evidenced through the fact that these firms are more inclined to make symbolic efforts to pursue more credit resources rather than engaging in substantive green investments to drive real green transition. This negative effect is more pronounced for small, non-state-owned and non-foreign-funded firms. Our further analysis suggests that the intensity of environmental law enforcement, the level of financial development, and intellectual property protection can mitigate this negative effect of green credit policy on green investment efficiency. Our study is groundbreaking in that it makes the first attempt to calculate the future value that green investment can create, which serves the basis for analyzing the economic effects of green investment at the industry level. The findings indicate that labor-intensive industries with close ties to consumers' daily lives have a higher future value for green investment. Conversely, capital-intensive industries such as the metallurgical industry have a lower future value for green investment. These findings emphasize the need to improve green credit regulation and make genuine green investment to accelerate real green transition in emerging economies.

Ding Q., Huang J., Chen J.

Green investment is an important way to strengthen pollution control and improve environmental quality. In the context of the rapid development of the digital economy, digital finance may be an important engine for corporate green investment. This study investigates the effect of digital finance development on corporate green investment based on data from heavily polluting industries in China from 2011 to 2020. The result suggests that digital finance greatly increases corporate green investment, and this finding still holds after a series of robustness tests. This is demonstrated by the fact that the coverage breadth and digitalization of digital finance significantly promote green investment. Digital finance mainly promotes green investment by stimulating intra-firm capital flows and intensifying market competition. The driving effects of digital finance on green investment are stronger in state-owned enterprises and in regions where environmental and financial regulations are more stringent. Our findings provide empirical inspiration for understanding how firms carry out environmental governance under the development of emerging financial market services.

Jia F., Li G., Lu X., Xie S.

Drawing on the psychology of names, this study examines whether a CEO having a given name that has a moral meaning (a moral name) affects corporate investment decisions on environmental protection. We find that a CEO having a moral name plays a significant role in increasing a firm's green investment. Further analysis shows that this positive relationship is more pronounced for state-owned firms. When CEOs' economic incentives are increased, the positive effect of CEOs' moral names on green investment is reduced. Overall, our findings suggest that given names with moral meanings have implications for the moral behavior of executives. • CEOs' given names containing moral meanings enhances corporate investment decisions on environmental protection. • State ownership moderates the relationship between CEOs' moral given names and green investment. • CEO economic incentives moderates the relationship between CEOs' moral given names and green investment.

Guceri I., Albinowski M.

We exploit a natural experiment in which two very similar investment subsidies were implemented in the same country, two years apart: once during a period of economic stability, and once during a period of very high uncertainty. Using rich administrative data, we find that, under low uncertainty, tax incentives have strong positive effects on average investment. Under high uncertainty, however, the story is different: there is vast heterogeneity in responses, with the firms that are sheltered from elevated uncertainty responding strongly to the policy, and the firms that are exposed to high uncertainty driving a drop in responses. This implies that periods of stability offer an important policy opportunity to encourage investment, and the impact of stimulus in crises depends on the distribution of firms in their exposure to uncertainty.

Siedschlag I., Yan W.

This paper examines factors underlying firms' investments in environmental protection (green investments). Using micro data from Ireland's industry sector over the period 2008–2016, we analyse a range of factors internal to firms such as firm characteristics, as well as external factors including environmental regulations, competition and spillover effects from other firms' green investment decisions. Our results indicate that larger firms, importers, and firms which are part of an enterprise group are more likely to invest in equipment for pollution control and in equipment linked to cleaner technologies. Within industry competition incentivizes firms to invest in equipment linked to cleaner technologies. Further, our results indicate that the propensity of firms to invest in equipment for pollution control are higher for more energy-intensive firms. Finally, our results uncover significant positive spillover effects from firms with green investments in the same industry or the same region on firms' decisions to invest on environmental protection. • Only a small proportion of firms invest in equipment for environmental protection. • Larger firms are more likely to invest in equipment for environmental protection. • Local firms and importers are more likely to invest in environmental protection. • Within industry competition incentivizes firms to investment in cleaner technologies. • There are positive spillovers within industry and within region.