How Do Enterprises Deal with Environmental Protection "Fee-to-Tax" Reform? Evidence from ESG Information Greenwashing in China

Abstract

This study employs the implementation of the Environmental Protection Tax Law of the People's Republic of China as a quasi-natural experiment. Using data from Chinese A-share listed companies between 2013 and 2022, it investigates the effect of the environmental protection "fee-to-tax" reform on corporate ESG information greenwashing. The findings indicate that, in response to the reform, companies have significantly reduced ESG information greenwashing, with this result remaining robust across various tests. Further analysis using the "double machine learning method" reaffirms the causal relationship. Additionally, mechanism tests reveal that the "fee-to-tax" reform primarily mitigates ESG information greenwashing by decreasing information asymmetry, enhancing local government environmental governance capabilities, and fostering green innovation. The moderating effect analysis shows that executive environmental awareness, media supervision, and investor sentiment can amplify the reform's impact on reducing ESG information greenwashing. Heterogeneity analysis demonstrates that the reform's effect is more pronounced in companies that voluntarily disclose ESG reports, heavily polluting companies, and firms with high equity concentration. This study offers empirical evidence to support the enhancement of the environmental protection tax system and provides a new theoretical framework for addressing greenwashing in ESG information disclosure.

Keywords: environmental protection tax, ESG information greenwashing, Executives' environmental awareness