Abstract
AbstractIn 2018, China realized the change of emission charge into environmental tax. The Environmental Protection Tax Law (EPTL), as an economic means to control environmental pollution, will have an impact on the behavior of firms. This paper uses 1,324 A-share listed companies from 2015 to 2020 as research samples. It adapts the Differences-in-Differences (DID) model to examine the influence of changing emission charge into environmental tax on firms’ real earnings management. The study found that the implementation of EPTL significantly decreased firms’ real earnings management. When the sample is divided by ownership structure, it is found that the inhibiting effect of EPTL is significant in State Owned Enterprises (SOEs), but not significant in non-SOEs. This study provides empirical evidence of how firms react after implementing EPTL, which helps understand the motivation of firms’ real earnings management and evaluate the potential impact of changing emission charge into environmental tax.KeywordsEnvironmental regulationEnvironmental taxReal earnings managementOwnership structure
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