An Empirical Analysis of the Impact of Environmental Protection Tax on Corporate Earnings Management

Abstract

The environmental protection tax (EPT) is an important environmental regulation measure in China and an important guarantee for high-quality economic development. An important measure for the construction of ecological civilization is that local governments promote the construction and improvement of EPT in the way of “Fee-to-Tax.” The EPT regulates pollution control, protects and improves the environment through taxation, and forms an effective mechanism for polluters to promote ecological civilization. This study made use of the data collected from different listed companies in Shanghai and Shenzhen provinces from 2010 to 2019, discussing the impacts of EPT on enterprise earnings management. An enterprise analysis model based on IoT-edge computing is suggested to decrease the processing time. The results of the empirical analysis completed in this study showed a significant positive correlation between EPT and enterprise earnings management. In other words, EPT increases the motivation of enterprise earnings management. Moreover, there is heterogeneity in the driving force of EPT on enterprise earnings management. For example, we observed that state-owned enterprises are significantly higher than non-state-owned enterprises. Moreover, pollution-intensive enterprises are significantly higher than non-pollution-intensive enterprises, and economically developed areas are significantly better than economically underdeveloped areas. In order to give better play to the effectiveness of EPT in modern environmental governance, the government should continue to improve the construction of EPT and speed up the construction process of ecological civilization in the republic of China.