Environmental Protection Fee-to-Tax and Corporate Environmental Social Responsibility: A Test Based on Corporate Life Cycle Theory

Abstract

Corporate environmental social responsibility enhancement is an important way to promote green and low-carbon economic transformation and achieve high-quality development. As an important reform of China’s environmental taxation system, environmental protection fees and taxes play a unique role in environmental governance. However, faced with the increase in the intensity of environmental regulations after the implementation of the environmental protection fee-to-tax, will firms take the initiative to assume environmental social responsibility (ESR)? This paper uses the implementation of China’s Environmental Protection Tax Law in 2018 as a quasi-natural experiment to study the impact of environmental protection fee-to-tax policy on corporate ESR from a life-cycle perspective. We find that, overall, the environmental protection fee-to-tax reform policy significantly increases the likelihood of corporate ESR by 66%. By the life cycle stage, the effect of environmental protection fee-to-tax policy is mainly reflected in maturity and decline stage firms, and the impact on growth stage firms is not obvious. The design of the current environmental protection tax system and the differences in financial status, business strategies, and environmental management levels of firms in different life cycle stages are important factors in this phenomenon. Further sub-sample regressions show that the environmental protection fee-to-tax policy significantly increases the ESR among state-owned, key regulated and higher financing-constrained firms, especially those in the maturity and decline periods. The findings of this paper enrich corporate life cycle theory and provide a reference for decision making to further improve environmental tax policies to stimulate a firm’s green and low-carbon transformation.

1. Introduction

Corporate environmental social responsibility (ESR) is an important influencing factor in mitigating global climate change and environmental pollution. Corporate ESR can directly change their business philosophy and production methods, helping them to implement a development strategy that balances the dual goals of maximizing shareholders’ profits and green transformation. Firms actively undertake ESR and improve environmental information disclosure to meet the “greening” review of the capital market [1], which is an important micro-market foundation for achieving sustainable economic and environmental development. However, under the traditional tax framework, there is often a contradiction between corporate social responsibility and profit maximization goals. Theoretically, the externalities of corporate social responsibility as a public good usually cannot be fully internalized, which ultimately leads to a deviation of resource allocation from the Pareto optimum under the market mechanism and a lower scale of green investment than the social optimum, which leads to the reality that firms with no or little ESR at all may have better market performance [2]. With the establishment and improvement of green taxation systems around the world, environmental taxation, as one of the market-based environmental regulation tools, makes the price signal of pollutant emissions clearer, which is conducive to attracting the flow and inclination of capital to greener and more environmentally friendly fields, and also helps to draw the attention of the internal management of firms to the field of environmental pollution control and management [3]. The policy goal of environmental protection tax is to internalize firms’ external cost of environmental pollution and to stimulate them to form environment-friendly production methods. Only if a firm’s environmental social responsibility is continuously enhanced can they gradually establish a green production system and realize a green and low-carbon transformation. So, in the above context, can the environmental protection fee-to-tax policy effectively encourage firms to take the initiative to assume ESR? Is there any difference in the impact on a firm’s ESR at different life cycles? These are the two questions that this paper studies.

Environmental protection tax is a market-based environmental regulation tool. Before the implementation of the Environmental Protection Tax Law, China implemented a long-term pollution charge system. In theory, compared with the pollution charge system, environmental protection tax is a more mandatory, executive and supervisory environmental regulation tool, and the cost pressure and supervisory pressure it brings will force firms to participate in environmental governance, and promote tax compliance and drive economic growth [4,5]. The most direct effect on the impact of environmental tax policy is the environmental governance effect of emission reduction [6]. Secondly, existing studies further analyze the effects of environmental tax on firm production and operation in terms of environmental investment [7], green technological innovation [8], and financialization [9], confirming that environmental tax can improve the total factor productivity and firm overall performance [10,11]. However, at present, there is still a lack of empirical evidence that the transformation from pollution charges to environmental protection taxes affects a firm’s ESR.

At present, the evaluation of the effect of China’s environmental protection fee-to-tax policy needs to be deepened, and the “black box” of tightening environmental regulations still needs to be further opened. The life cycle theory points out that the scale, profitability, growth, investment and financing strategies, R&D, and innovation willingness of firms are significantly different in different development stages [12]. It can be reasonably expected that the effect of the environmental protection fee-to-tax policy will be different due to the differences in each life cycle stage. Therefore, using the data of Chinese A-share listed firms, this paper has certain theoretical and practical significance to examine the impact of the environmental protection fee-to-tax policy on corporate ESR from the perspective of the life cycle. The above is the purpose of this study.

The main contributions of this paper include: Firstly, this paper investigates the improvement effect of environmental protection fee-to-tax policy on corporate ESR, verifying the new influencing factors of corporate ESR, and enriching the empirical evidence on the micro policy effect of environmental protection tax. Secondly, this paper examines the heterogeneity of corporate ESR behavior in the Chinese context from the perspective of the corporate life cycle and analyzes the causes behind the tightening of environmental protection tax policy from the nature of corporate property rights, industry attributes, and financing constraints in a multidimensional test. Overall, the findings of this paper provide more targeted guidance suggestions for optimizing environmental protection tax policies and improving the long-term incentive mechanism for corporate ESR. Finally, based on the triple difference model, it is helpful to avoid the endogenous problem between the environmental protection fee-to-tax policy and corporate ESR, and provide a reliable guarantee for effectively evaluating the policy effect of environmental protection tax.

The next part of this paper is structured as follows. Section 2 is the institutional background, theoretical analysis, and research hypotheses. Section 3 is the research strategy. Section 4 is the empirical results and analysis. Section 5 is the conclusions and implications.

2. Literature Review

The literature that is more closely related to this paper can be divided into two branches as follows. One branch is corporate social responsibility-related research. The existing literature focuses on government policies, internal governance, and external regulation, mainly on social security policies [13], tax expenditures [14], political connections [15,16], corporate governance and executive incentives [17,18], disclosure regulation [19], credit allocation [20], and other aspects. These studies provide useful theoretical guidance and empirical experience for us to understand the institutional construction and driving mechanism of corporate social responsibility. ESR is one of the main forms of corporate social responsibility, which plays a key role in establishing a good green corporate image and forming a green competitive advantage [21]. With increasing attention to environmental pollution, corporate ESR has gradually become a hot topic of independent research. Si and Cao [2] investigated the impact of green credit policy on corporate ESR, and found that it effectively improved corporate ESR, especially corporate front-end governance and green office. Yankovskaya et al. [22] believed that the development of AI is conducive to balancing the interests of stakeholders and maintaining market balance, thus promoting the ESR. However, from the perspective of tax policy, the issue of how the improvement of the environmental protection tax system in developing countries affects corporate ESR still needs to be further strengthened. Lu et al. [23] studied the impact of tax policies on corporate ESR based on a firm’s actual tax burden and found that the increase in a firm’s actual tax burden is conducive to ESR. Xu et al. [24] compared the different impacts of emission tax on corporate ESR under the two modes of “T game” and “E game” by constructing the Cournot–Bertrand model. At present, there is still little empirical evidence of the impact of environmental tax policies under specific circumstances.

The other is the micro-effect assessment of environmental tax policy, mainly including pollution reduction effect and firm production and operation. Specifically, Tian et al. [25] found that the change of environmental protection fee to tax has effectively promoted the environmental protection investment and the upgrading of the environmental protection investment structure, which is mainly achieved through three channels: increasing the cost of pollution discharge, strengthening the rigidity of law enforcement, and breaking the collusion between government and firms. Liu and Xiao [26] believed that environmental protection tax effectively promotes green innovation activities, but mainly stimulates green innovation in terminal governance rather than in source control. Zhao et al. [27] found that environmental protection tax brings economic performance to firms by improving the quality of innovation. Gao et al. [28] found that the environmental protection tax has a synergistic effect on the emission reduction of air pollutants and carbon dioxide. Ji and Zeng [29] believed that the environmental fee tax reform would increase a firm’s environmental pollution cost by strengthening the rigidity of tax collection and management, so as to realize the capacity reduction of heavily polluting firms. Although these studies can help us to fully understand the policy effect of environmental protection tax. However, it is not difficult to find that empirical evidence on the effects of environment-related tax policies on corporate ESR under specific circumstances still needs to be further strengthened.

3. Institutional Background and Research Hypothesis

3.1. Institutional Background

As an important tool of market-based environmental regulation, environmental taxes or emission fees can effectively promote pollution reduction by internalizing the unit cost of pollution emissions in response to the negative externalities generated by enterprises’ environmental pollution. This mechanism of action has achieved good governance effects in developed countries [30]. Referring to the experience of environmental taxation systems in developed countries, China established the emission fee system legally in 1979 and subsequently carried out a series of legal improvements, but the regulatory effect of emission fees has caused concerns among the government and the community due to the limitations of the enforcement standards and the regulation intensity [3]. Given this, China’s first Environmental Protection Tax Law was officially announced through deliberations in December 2016 and was implemented on 1 January 2018, marking the arrival of China’s first tax system aimed at environmental protection on the historical stage.

The environmental protection fee-to-tax policy mainly influences the firm’s behavior to take the initiative of ESR in the following aspects: First, the legislative level is upgraded. The environmental protection tax law is the first tax law passed after China proposed to implement the principle of legal taxation. Compared with the emission fee, the environmental protection tax has a clearer legal basis and is more authoritative and compulsory, which is conducive to improving taxpayers’ environmental awareness and compliance, and strengthening firms’ responsibility for pollution control and emission reduction. Second, the main body of the levy changes. Emission fees are collected by the environmental protection department, environmental protection tax adopts the “enterprise declaration, tax collection, environmental protection collaboration, information sharing” mode of collection and management. This change will help the taxation and environmental protection departments to form a regulatory synergy and improve the standardization and transparency of environmental tax collection thus strongly constraining the firm’s environmental responsibility to treat and reduce pollution. Third, the tax rate flexibility and emission reduction preferences. In addition to the original exemptions and preferences, the environmental protection tax has increased the incentive for firms to reduce emissions, i.e., “if the concentration of taxable air or water pollutants emitted by a taxpayer is less than 30% of the prescribed standard, the environmental protection tax will be reduced by 75%”. The environmental protection tax expands the coverage of “less emissions and less levy” preferences, which will help stimulate firms to take the initiative to undertake ESR to reduce environmental management costs. Fourth, regions have the right to set their own pollution levy standards. In essence, the environmental protection tax law is a further development of the emission fee system, and some regions have implemented the environmental protection tax law in a more stringent manner than the emission fee in the levy scope and standard. According to the Environmental Protection Tax Law, the state sets the minimum standard for major pollutants, and localities can adjust the standard upward within ten times the minimum standard, meaning that each province, autonomous region, and municipality directly under the central government has the right to choose its own levy standard for major pollutants according to the situation. After the implementation of the 2018 Act, some regions maintained the original emission fees unchanged, and some regions adopted higher levy standards than the original emission fees. This is equivalent to a “natural experiment” with obvious exogenous features and provides a rare opportunity to effectively identify the impact of China’s environmental protection fee-to-tax on corporate ESR.

3.2. Theoretical Analysis and Research Hypothesis

3.2.1. Environmental Protection Fee-to-Tax and Corporate ESR

ESR, as a special investment in the field of corporate environment, is crucial for firms to implement environmental protection measures and practice the green development concept. In reality, due to the limitations of access to information and the complexity of the external competitive environment, firms need a clear market price signal to guide them to adjust their behavioral strategies of inefficient resource use and excessive pollutant emissions in the production and operation process. A reasonable and effective environmental protection tax has an important impact on the direction and stage of corporate ESR. Specifically, after the formal implementation of the environmental protection tax, the environmental protection tax amount has been raised in areas where the taxable pollutant emission levy standard has been adjusted upward, and the increase in the levy intensity and enforcement level directly affects the cost expectation of firm’s environmental pollution, which will drive firms to pay attention to the fulfillment and disclosure of ESR to reduce the institutional cost of responding to administrative supervision. Moreover, the implementation of environmental protection tax also provides a competitive environment for firms with transparent information and fair regulation and changes the uncertain expectations of firms in environmental investment by imposing punitive rents on their unrestricted pollution emissions, which is conducive to guiding firms to pay attention to ESR in their internal operation process. Especially for firms in polluting industries, the design of pollution emission-linked environmental tax largely increases the cost of environmental violations and motivates them to take the initiative to purchase energy-saving and environmental protection equipment and make green innovations to improve the overall ESR level.

When there is a lack of effective external incentives, firms may adopt the lowest-cost pollution treatment in a certain segment [10], which will not be conducive to corporate ESR. But the enactment of the Environmental Protection Tax Law and the official implementation of the environmental protection tax heralded China’s determination to establish and improve a green tax system, making firms truly aware of the need for a green and low-carbon transition. Therefore, the environmental protection tax has a more obvious signaling effect and a more comprehensive environmental governance chain, which is conducive to raising corporate ESR awareness. Accordingly, we propose Hypothesis 1.

Hypothesis H1.

The environmental protection fee-to-tax policy effectively increases corporate ESR level.

3.2.2. The Main Mechanisms by Which Environmental Protection Taxes Affect Corporate ESR in Different Life Cycle Stages

Corporate life-cycle theory suggests that, in addition to age, firms differ significantly in size, profitability, willingness to protect the environment, and business strategy throughout the life cycle from birth to death. The key constraints faced at different stages also differ [12]. The ESR level undertaken by firms is a prudent decision to be made by firms after a comprehensive assessment of their development position, institutional environment, and resource endowment. Meanwhile, combined with the policy features of China’s current environmental protection tax, it can be hypothesized that the environmental protection fee-to-tax policy will have a differentiated impact on firms at different life cycle stages.

There are three main characteristics of growth-stage firms. First, financing constraints are greater, capital expenditure is the main allocation of funds, and the willingness to assume ESR is not strong. On the one hand, the primary task of capital allocation for growth stage firms is to purchase machinery and equipment, set up production lines, build plants, and conduct other fixed asset projects. Firms at this stage have limited production capacity and less pollutant emissions, so the impact of environmental protection tax on firm operating costs is small. On the other hand, due to their initial entry into the market, growth-stage firms have a small market share and their own profitability is in its infancy or has not yet started to be profitable. As a result, growth-stage firms have tight internal cash flow and lack endogenous financing capacity. Meanwhile, due to the uncertainty of development prospects in the industry, growth-stage firms have limited access to external financing such as debt and equity. The firm’s reputation in the industry is also not sufficient to support its access to commercial credit financing. Therefore, under financing constraints, firms in the growth period have less incentive to undertake ESR driven by environmental protection tax policies. Second, they are subject to relatively small preferences from environmental protection tax policies. From the design of environmental protection tax policy, the applicable target is generally firms with taxable pollutant emissions. The environmental protection tax has increased tax relief items compared with the emission fee policy, and the concentration of taxable pollutants is lower than the national or local standards, depending on the situation, there will be corresponding tax relief, but the premise for firms to get substantial tax benefits is that the pollution control technology is mature, and the lower the concentration of taxable pollutants, the more the amount of tax relief is enjoyed. For growth-stage firms with uncertain development prospects and fluctuating profitability, it is difficult to get “real money” tax benefits in short term by undertaking ESR. Therefore, the environmental protection tax has a limited incentive effect on mature firms’ ESR.

When firms enter the maturity stage, all of the above characteristics will be significantly changed: firstly, in terms of financing constraints, the production and operation mode and management structure of mature firms become more and more perfect, and a relatively stable and extensive sales network is formed. Firms begin to obtain stable profits, and the pressure of endogenous financing is relieved. At the same time, good development prospects and market reputation make it easy for mature firms to obtain higher exogenous credit funds at lower costs. Commercial credit also enables them to choose the optimal financing structure and flexibly allocate liquidity under a specific interest rate level. In terms of expenditure structure, the fixed assets construction of the firm was basically completed, and capital expenditure decreased. The market recognition of products has increased, and overhead expenses, such as advertising and publicity, have been significantly reduced. Overall, the change in both income and expenditure has shifted the business strategy from “survival” to “development”, and firms can release positive signals to investors and consumers and develop a wider market share by taking up ESR. Therefore, the willingness to take up ESR is significantly increased. Secondly, as mature firms have stable production capacity and are still expanding market share and introducing new production lines, they are expected to emit more pollutants in the future. Under the current environmental protection tax policy, the benefits of environmental social responsibility are greater for firms.

As firms move into recession, their market share and profitability begin to shrink, leading to early warning of financial conditions and increased operational risks. The endogenous and exogenous financing ability is showing signs of decline, and the financing constraints faced by firms are increasing. Meanwhile, firms need to obtain exogenous funds such as green credit through ESR and demonstrate a sustainable corporate image to the government and consumers in order to reduce the institutional costs of environmental regulation and expand new consumer groups and market shares [31]. In addition, Chinese listed firms usually face the risk of delisting and being acquired during the recession stage. Due to the long-standing IPO approval system in China’s stock market, firms have a certain scarcity of qualifications to go public. To avoid continuous losses and exit from the capital market, firms themselves and even local governments have the motive to reverse losses and “save their shells”. With the increasingly stringent regulatory requirements of the SEC on social responsibility information disclosure of listed companies, active disclosure and undertaking ESR has a positive effect on IPO audit and reducing stock market price volatility and obtaining financing [1]. Based on the analysis of the above three corporate life cycle stages, we propose Hypothesis 2.

Hypothesis H2.

Compared with growth stage firms, the environmental protection fee-to-tax policy has a more significant incentive effect on firms in maturity and decline stages to actively assume ESR.

4. Research Strategy

4.1. Data Sources

This paper takes Chinese A-share listed firms from 2010–2020 as the research sample, and the main data sources include China Research Data Service (CNRDS) Platform. With reference to the common practice of existing literature, we processed the data of listed firms as follows: excluded data of firms in finance and real estate industries; excluded data of firms with abnormal financial systems, such as ST, ST*, and PT; excluded data of firms with gearing ratios less than 0 and greater than 1; excluded data of firms with serious missing financial data and other indicators.

4.2. Variable Definition

4.2.1. Corporate Environmental Social Responsibility

Environmental social responsibility is an important manifestation of firms’ “double dividend” of environmental and economic performance and green competitiveness. In this paper, the evaluation index of environmental social responsibility comes from the social responsibility report published by Hexun.com. The evaluation index in this report is based on the corporate social responsibility report and the annual report issued by the listed companies of the Shanghai Stock Exchange and Shenzhen Stock Exchange through the official website, covering five secondary indicators including corporate environmental awareness, environmental management system certification, environmental protection investment amount, number of pollution discharge types, and number of energy conservation types. The higher the score of this indicator, the higher the level of corporate ESR. The social responsibility index report has been published since 2010. Compared with the Runling Global Social Responsibility Index report, the Hexun.com Corporate Social Responsibility Report index covers more listed companies, the evaluation is more comprehensive and the data is updated in a timely manner, which is a better choice to study the social responsibility of listed companies in China.

4.2.2. Core Explanatory Variables: The Formal Implementation of Environmental Protection Fee-to-Tax Policy in 2018

$Pos{t}_t$ indicates whether the environmental protection tax is formally implemented, set to 0 before 2018, set to 1 in 2018 and after. $Trea{t}_p$ indicates whether the tax standard of taxable pollutants in province (autonomous region, municipality, referred to as region) where the firm located is increased, and the raised region is set to 1, while the unchanged region is set to 0. $In{d}_h$ indicates the pollution characteristics of the industry where the firm located, if it is a heavily polluted industry (This paper determines the pollution characteristics based on the heavy pollution industry catalog published in the Notice on Environmental Protection Verification of Enterprises Applying for Listing and Listed Enterprises Applying for Refinancing [32] and the Notice on Further Standardization of Environmental Protection Verification of Production and Operation Companies Applying for Listing or Refinancing in Heavy Pollution Industries [33]. The final determination of heavy polluting industries includes metallurgy, chemical, petrochemical, coal, thermal power, building materials, paper making, brewing, pharmaceutical, fermentation, textile, tannery, and mining industries.), the value is 1; otherwise, it is 0. $Polic{y}_{tph}$ represents the interaction term of $Pos{t}_t$, $Trea{t}_p$ and $In{d}_h$.

4.2.3. Corporate Firm Life Cycle

The existing literature on corporate life cycle identification methods are mainly divided into the univariate method (such as firm size, years of establishment, profitability status, etc.), comprehensive indicator method [34], and cash flow pattern method [35]. Collectively, the cash flow pattern method proposed by Dickinson [35] divides the corporate life cycle into eight stages, such as start-up, growth, and maturity, through different permutations of the net cash flows from operations, investment, and financing. We adopt the practice of Liu et al. [36] to further categorize them into growth, maturity, and decline stages to reflect firms’ business conditions and development prospects, which is more consistent with the distribution assumption of corporate life cycle samples and also mitigates the interference of inter-industry differences.

Table 1. Combination of firm cash flow characteristics at different life cycle stages.

Net Cash Flow Characteristics	Growth		Maturity	Decline
	Start-Up	Growth	Maturity	Decline	Decline	Decline	Shake-Out	Shake-Out
Operating	-	+	+	-	+	+	-	-
Invest	-	-	-	-	+	+	+	+
Financing	+	+	-	-	+	-	+	-

Note: - represents net cash flow < 0; + represents net cash flow > 0.

shows the specific division of corporate life cycle stages.

4.2.4. Control Variables

To reduce the influence of observable factors on corporate ESR, other control variables are considered in this paper. ① Firm size (Size): The larger the firm is, the more attention it receives from the government and the public. It is more willing to gain more social recognition and market share by taking social responsibility. We choose the logarithm of the firm’s total assets at the end of the year plus one to measure. ② Operating cash flow ratio (OPCash): When the operating cash flow is large, the firm’s financial condition is good, the financing constraints are low, and its willingness to assume ESR is stronger. We choose the ratio of net cash flow from operating activities to total assets at the end of the year. ③ Fixed assets ratio (Fixratio): Fixed asset investment reflects a firm’s capital intensity and development mode to a certain extent, and then affects its ESR level. We choose the ratio of total fixed assets to the total assets of the firm. ④ Profitability: Stronger profitability of a firm means better business condition and wealth creation ability, and the firm pays more attention to social reputation and awareness of ESR undertaking. This paper uses return on assets (ROA) and return on net assets (ROE) to measure. ⑤ Growth in revenue: Generally speaking, the higher the growth in revenue, the better the market development prospect, and the more firms will take the initiative to undertake ESR in order to obtain goodwill. In this paper, we use the ratio of (operating income for the current period—adjusted for the same period of the previous year)/adjusted for the same period of the previous year of ABS. ⑥ Equity concentration (ShrHold10): Equity concentration is related to the principal-agent problem of corporate governance, directly affects the firm’s business risk and performance, and also affects management’s decision to assume ESR. This paper uses the sum of squares of the shareholdings of the top ten largest shareholders of the firm to measure. All control variables are winsored at the bilateral 1% level.

Table 2. Descriptive statistics of the main variables.

Variable	Obs	Mean	Std. Dev.	Min	Max
ESG	28,201	0.2676	0.8116	0.0000	3.4340
Policy	28,201	0.4632	0.2434	0.0000	1.0000
Size	28,201	21.9442	1.3124	19.3683	26.0596
OPCash	28,201	0.0179	0.0552	−0.1533	0.1788
Fixratio	28,201	0.2241	0.1622	0.0044	0.7345
ROA	28,201	2.5331	3.2392	−9.1650	12.3825
ROE	28,201	3.8770	6.7063	−31.6925	20.8675
Growth	28,201	15.0526	32.3217	−44.9918	134.7581
ShrHold10	28,201	0.5892	0.1527	0.2299	0.9060

Note: All continuous variables are winsored at the bilateral 1% level.

shows the descriptive statistics of the main variables.

4.3. Model Setting

This paper adopts a triple difference approach to identify the impact of environmental protection fee-to-tax policy on corporate ESR in a quasi-natural experiment with the official collection of environmental protection tax. The triple difference model compares the differences in the average treatment effects of ESR between polluting and clean industries in the regions where the tax rate of taxable pollutants has increased or unchanged before and after the environmental protection fee-to-tax policy, as far as possible, excluding the effects of other factors that do not change over time and are difficult to observe. Drawing on Deschenes et al. [37], the benchmark model is set as follows.

$$Y_{ihpt}={\partial }_{1}Polic{y}_{tph}+{\partial }_{2}Treatpos{t}_{pt}+{\partial }_{3}Indpos{t}_{ht}+{\partial }_{4}IndTrea{t}_{hp}+{\partial }_{k}Controls+{\delta }_i+{\phi }_t+{\epsilon }_{ihpt}$$

(1)

where $i, h, p$ and $t$ represent each listed firm and its industry, province (autonomous region, municipality), and year, respectively. The explanatory variable $Y_{ihpt}$ represents the listed firm’s ESR behavior. The estimated coefficient of $Polic{y}_{tph}$ represents the effect of the environmental protection fee-to-tax policy. $Controls$ represent other factors that may affect the listed firm’s ESR behavior. ${\delta }_i$ is the firm fixed effect, controlling for other factors that do not vary over time at the firm level. ${\phi }_t$ is the year fixed effect, controlling for macro policy shocks that do not vary at the individual level at the year level. ${\epsilon }_{ihpt}$ is the random disturbance term. All regressions’ standard errors are clustered at the industry level to eliminate the effects of autocorrelation and heteroskedasticity of the disturbance terms.

4.4. Staged Statistics and Tests of Corporate Life Cycle

Table 3. Main variables by life cycle stage statistics and tests.

Main Varibale	Corporate Life Cycle			T Statistic
	Growth	Maturity	Decline	Growth-Maturity	Growth-Decline	Maturity-Decline
Obs	13,559	8415	6227	-	-	-
Firm age	10.2726	10.5581	11.3054	2.9489 ***	9.5380 ***	6.0428 ***
Growth rate	20.056%	11.543%	8.902%	−19.5742 ***	−21.7645 ***	−5.1437 ***
Retained earnings ratio	0.3002	0.2979	0.1492	−0.448	−22.2265 ***	−18.4604 ***
ESR	0.2984	0.2898	0.1704	−0.7267	−10.5024 ***	−9.3094 ***
Capital expenditure rate	0.0495	0.035	0.0236	−27.5129 ***	−44.6065 ***	−24.4586 ***
Overhead rate	10.763%	10.171%	14.559%	−4.9020 ***	23.7057 ***	25.0932 ***
Total return on assets	2.358%	3.357%	1.802%	23.6908 ***	−11.8363 ***	−26.2333 ***
Asset liability ratio	0.4406	0.3827	0.3776	−20.9089 ***	−20.5346 ***	−1.4530

Notes: (1) Except for observations, the statistics in columns 2–4 are the means of sample firms at each stage; (2) ***, **, and * denote significant at the 1%, 5%, and 10% levels, respectively.

shows the means of the main variables according to the different corporate life cycle stages and the independent sample t-test between each life cycle. In terms of the number of observations, the number of firms in the growth stage is the largest, followed by the maturity stage, and the number of firms in the decline stage is significantly less than the first two, which is consistent with the characteristics of the emerging capital market in China. In this paper, we pay special attention to the three indicators of firm age, operating income growth rate, and retained earnings ratio. The reason is that these three indicators are not directly related to the direction of a firm’s operating, investment, and financing cash flows, but they also reflect the life cycle stage. Generally speaking, age increases as the life cycle stage of a firm advances, while the operating income growth rate and retained earnings ratio are exactly the opposite. The results in Table 3 are exactly in line with this intuition, and side-by-side reflect the scientific nature of the cash flow model method, which also provides a basis for the classification of the corporate life cycle through the integrated indicator method in the robustness test.

This paper further analyzes the characteristics of corporate ESR and finances at different stages to initially verify the research hypothesis. From the average value of ESR, it shows the characteristics of “growth > maturity > recession”. This indicates that the level of corporate ESR in the growth stage is higher than that in the mature and decline stages, which means that under the influence of the green development concept, the growth stage firms will adopt green production methods at the early stage of their creation to adapt to the environmental protection tax and other environmental protection-related reviews that they may face from government regulators in the future development process, reducing the institutional costs of dealing with environmental regulations. In other stages, firms need to make more adjustments to actively take up ESR and achieve green production due to their own development inertia, so they are more affected by the policy, which also supports the previous theoretical analysis.

The financial indicators show that the capital expenditure rate decreases continuously from the growth to the maturity and the decline stage, which indicates that the firms in the growth stage are in the demand stage of investing heavily to complete capital accumulation in the early stage. While the capital expenditure rate decreases significantly when developing to the maturity and decline stage, indicating firms gradually enter into a conservative operation state. The overhead rate is “decline > growth > maturity”, and most of the accounting accounts are conference hospitality, advertising, and travel expenses, meaning that firms in decline need to build new sales channels and profit growth points, while firms in maturity have more stable sales networks and less non-productive expenses. The total return on assets is “maturity > growth > decline” and the asset–liability ratio is “growth > maturity > decline”. These three indicators show that enterprises in the maturity period have higher profit levels and less financing constraints. The declining profit level and the increasing difficulty of financing constraints for firms in the decline stage also confirm that the financial situation in these two stages may be more vulnerable to the environmental fee-to-tax policy.

5. Empirical Results and Analysis

5.1. Parallel Trend Hypothesis Testing and Dynamic Effects

The prerequisite for the policy identification effect of the triple difference model is that the corporate environmental social responsibility of the treatment group and the control group meet the parallel trend before the implementation of the environmental protection tax policy. This paper uses the event study method to test the parallel trend hypothesis, taking the year before the reform as the base period of the event study, and the model is set as follows.

$$\begin{gathered} Y_{ihpt}={{\displaystyle \sum }}_{i=2010}^{2020}{\beta }_{k}Polic{y}_{tph}+{\beta }_{2}Treatpos{t}_{pt}+{\beta }_{3}Indpos{t}_{ht}+{\beta }_{4}IndTrea{t}_{hp} \\ +{\beta }_{k}Controls+{\delta }_i+{\phi }_t+{\epsilon }_{ihpt} \end{gathered}$$

(2)

where $i$ represents the year dummy variable and ${\beta }_k$ reflects the changes in the sample period of firms in the treatment and control groups before and after the environmental protection tax policy compared to the base period. From Figure 1, the estimated coefficients fluctuate around 0 and are not significant before the environmental protection fee-to-tax policy, indicating that there is no significant systematic difference in the ESR between the treatment and control groups. Moreover, it can be seen from Figure 1 that the estimated coefficients are significantly positive in periods 0 and 1 after the environmental protection fee-to-tax policy, indicating that the corporate ESR of polluting industries in the treatment group shows a significant improvement effect after the policy, but the effect slightly decays as the policy goes on.

5.2. Full-Sample Benchmark Regression Results

Table 4. Environmental protection fee-to-tax policy and corporate ESR: full sample results.

VARIABLES	(1)	(2)	(3)	(4)
	Full Sample	Growth	Maturity	Decline
Mean of ESG	0.2607	0.2870	0.2854	0.1680
Policy	0.1766 *** (0.0712)	0.0826 (0.0818)	0.2806 *** (0.0852)	0.1956 ** (0.0821)
Treatpost	−0.2453 *** (0.0209)	−0.2163 *** (0.0235)	−0.3544 *** (0.0309)	−0.1946 *** (0.0261)
Indpost	−0.3498 *** (0.0363)	−0.3310 *** (0.0582)	−0.3955 *** (0.0418)	−0.2553 *** (0.0854)
Size	−0.0746 *** (0.0113)	−0.0908 *** (0.0123)	−0.1144 *** (0.0227)	−0.0605 ** (0.0256)
OPCash	0.0273 (0.1471)	−0.4042 ** (0.1611)	0.8996 ** (0.4097)	0.2252 (0.2757)
Fixratio	0.0235 (0.0799)	0.0124 (0.1046)	0.1542 (0.1635)	0.0524 (0.1138)
ROA	0.0019 (0.0046)	0.0025 (0.0077)	0.0037 (0.0099)	0.0101 * (0.0051)
ROE	0.0022 (0.0014)	0.0067 ** (0.0030)	0.0002 (0.0036)	−0.0012 (0.0021)
Growth	0.0003 ** (0.0001)	0.0003 (0.0002)	0.0000 (0.0003)	0.0001 (0.0001)
ShrHold10	−0.3824 ** (0.1574)	−0.3550 *** (0.1105)	−0.0823 (0.2112)	0.0407 (0.1180)
Constant	1.8709 *** (0.2787)	2.5401 *** (0.3119)	2.8958 *** (0.5869)	1.5077 *** (0.5567)
Observations	28,201	14,101	8552	6316
R-squared	0.4178	0.5304	0.5033	0.5048
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Notes: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively; standard errors are clustered at the industry level and reported in parentheses below the estimated coefficients; same table below.

shows the full-sample regression results of the benchmark model (1). The estimated coefficient of $Policy$ in column (1) significantly increases by 0.1766 at the 1% level, and the increase in the probability of corporate ESR is 66% compared to the treatment group mean. This indicates that the ESR of polluting industries in the areas where the tax standard was increased after the environmental protection fee-to-tax policy significantly improved, which verifies Hypothesis 1. By the life cycle stage, environmental protection fee-to-tax policy showed a significant improvement effect on the level of corporate ESR in the maturity and decline stage, but not in the growth, which is consistent with Hypothesis 2. In terms of the absolute value of the regression coefficients, the environmental protection fee and tax policy improves the ESR level of mature and decline firms by 0.286 and 0.1956, respectively, indicating that with the increase in the policy intensity, mature firms are more influenced by the policy.

5.3. Regression Results of Sub-Sample Heterogeneity

5.3.1. State-Owned and Non-State-Owned Firms

We divide the sample into state-owned (SOE) and non-state-owned (non-SOE) firms (SOEs include government agencies, public institutions, state-owned or state-owned holding, and collective enterprises; the rest are non-SOEs.) based on the “nature of operation” indicator provided in the CNRDS database.

Table 5. Environmental protection fee-to-tax and corporate ESR: SOEs and non-SOEs.

Panel A: SOE	Full Sample	Growth	Maturity	Decline
Policy	0.2423 *** (0.0701)	0.2285 (0.1429)	0.2703 *** (0.0887)	0.5694 *** (0.1688)
Observations	9728	4113	3154	2461
R-squared	0.4081	0.5277	0.4894	0.5001
Panel B: Non_SOE	Full sample	Growth	Maturity	Decline
Policy	0.1070 (0.0625)	0.0649 (0.0550)	0.3521 *** (0.1075)	0.0101 (0.0655)
Observations	18,473	8941	5515	4017
R-squared	0.4183	0.5108	0.5157	0.5114
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

shows the results of the sub-sample regressions on the firm’s nature. The results show that the incentive effect of environmental protection fee-to-tax on the ESR of SOEs is more pronounced than that of non-SOEs. By stage, the incentive effect of the policy is mainly reflected in the SOEs’ maturity and decline, but there is also a significant positive effect on non-SOEs in the maturity stage. This result is consistent with China’s national conditions: firstly, the promotion of SOE helmsmen relies on the assessment and evaluation of the immediate government and has distinct political characteristics, so the leadership of SOEs will respond more actively to the green and low-carbon development strategy and take the initiative to undertake ESR after the implementation of the environmental protection fee-to-tax policy to seek political re-election or promotion [38]. Secondly, from resource endowment, SOEs have obvious comparative advantages over non-SOEs in terms of access to credit and loans, financial and tax incentives, and land approvals. The conversion of environmental protection fee-to-tax itself will increase firms’ actual operating burden and transaction costs to deal with strict environmental regulations, while SOEs or mature non-SOEs have sufficient capital flow and stronger risk-taking ability, so they are more willing to fulfill ESR after the implementation of environmental protection fee-to-tax policy.

5.3.2. Heavy Polluting Firms and Non-Heavy Polluting Firms

We further analyze the heterogeneity impact of environmental protection fee-to-tax on different pollution types of firms by including the firms listed as key emission monitoring in 2017 as heavy polluters according to the “key emission firms list” in the CNRDS database.

Table 6. Environmental protection fee-to-tax and corporate ESR: heavily polluting and non-heavily polluting firms.

Panel A: HPF	Full Sample	Growth	Maturity	Decline
Policy	0.1139 *** (0.0350)	0.0364 (0.1017)	0.3535 ** (0.1481)	0.1325 ** (0.0500)
Observations	5236	2779	1491	966
R-squared	0.3310	0.4476	0.4597	0.4117
Panel B: Non-HPF	Full sample	Growth	Maturity	Decline
Policy	0.0285 (0.0673)	−0.0252 (0.0701)	0.1602 (0.1096)	−0.1396 (0.0987)
Observations	22,965	10,702	6647	5616
R-squared	0.5351	0.6209	0.6205	0.5613
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

shows the regression results for different types of polluting firms in the sub-sample. The results show that the environmental protection fee-to-tax policy significantly increases the ESR of heavily polluting firms (HPF), especially in the maturity and decline stages, and the incentive effect on non-heavily polluting firms (non-HPF) is not significant. These results are in line with expectations: firstly, at the early stage of China’s industrialization, HPFs are usually the pillar industries of local economic development, bearing the heavy responsibility of absorbing employment and creating economic performance. During the emission fee collection period, local governments often choose to lower the emission fee collection standards and relax the rigidity of environmental enforcement for the political motives of “stabilizing employment and preserving growth”, thus forming a soft constraint on HPFs’ environmental regulation. Secondly, from the perspective of firm characteristics, the total amount of pollutant emissions and the possibility of non-compliance are higher for HPFs than for non-HPFs, and therefore HPFs have greater gains from environmental rent-seeking. Based on the above two points, the environmental protection fee-to-tax policy makes the environmental compliance cost of HPFs rise, and the incentive utility of HPFs to gain recognition from stakeholders such as government and financial institutions by undertaking ESR is greater. In particular, HPFs in the maturity and declining stages have a more urgent desire to achieve green transformation by undertaking environmental social responsibility and seeking more resources from the government and financial institutions. Therefore, the environmental protection tax has a greater impact on the heavy polluters in the maturity and decline stages.

5.3.3. Firms with High and Low Financing Constraints

We calculate the SA index by referring to Hadlock and Pierce [39] and use the median of the SA index to divide the sample into two groups: high financing constraints (HFC) and low financing constraints (LFC).

Table 7. Environmental protection fee-to-tax and corporate ESR: higher and lower financing constraint.

Panel A: HFC	Full Sample	Growth	Maturity	Decline
Policy	0.1730 ** (0.0731)	0.0828 (0.0756)	0.3186 *** (0.1115)	0.1936 * (0.1031)
Observations	14,101	6512	4730	2859
R-squared	0.3930	0.5079	0.5031	0.4817
Panel B: LFC	Full sample	Growth	Maturity	Decline
Policy	0.0606 (0.1079)	0.0726 (0.1175)	0.2065 (0.1343)	0.1637 (0.1506)
Observations	14,100	7757	4296	2047
R-squared	0.5700	0.6250	0.6377	0.6573
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

shows the results of the grouping regressions: overall, the environmental protection fee-to-tax significantly improves firms’ ESR with higher financing constraints, but not for firms with lower financing constraints. By stage, the policy incentive effect is mainly reflected in the maturity and decline stages of firms with higher financing constraints, and the policy effect is significantly larger in the maturity than in the decline stage. This may be due to the fact that firms with higher financing constraints are willing to improve their financing constraints by taking up ESR to release positive signals and build a good reputation. For firms with high financing constraints in the maturity and decline, their endogenous financing capacity is gradually reduced, and they need to attract exogenous funds such as green credit and green bonds to relieve cash flow pressure and reserve funds for the next transformation and upgrading of the firms and the formation of new competitive advantages [1]. Therefore, the incentive effect of environmental protection fee-to-tax policy is also the most significant for firms with higher financing constraints in the maturity and decline stages.

5.4. Endogenetic Test

5.4.1. Placebo Test

To exclude the possible interference of confounding factors related to the selection of treatment groups affected by policy on the benchmark results, this paper uses the method of randomly dividing the treatment group and the control group for the placebo test. Specific approach: Keep the implementation time of the policy unchanged, randomly select the same number of virtual treatment groups from the sample that are affected by the environmental protection fee-to-tax policy, and repeat the sampling 1000 times, estimating 1000 false policy effects according to the benchmark model (1). The estimation results in Figure 2 show that the kernel density curve enclosed by the randomly generated false estimation coefficients is on both sides of zero and follows the normal distribution, and the real policy estimation coefficients are obviously different from the false estimation coefficients obtained by random sampling. This shows that the result of effectively improving corporate ESR by environmental protection fee-to-tax policy is not caused by other random factors.

This paper adopts the method of changing the implementation time of the policy to conduct the placebo test to further eliminate the interference of the confounding factors over time to the benchmark estimation results. Specific approach: Only retain the sample before the policy in 2018, and advance the start time of the policy to 2015 and 2014 to estimate the benchmark model (1). Columns (1) and (2) of

Table 8. Estimation results of change policy implementation time, EBM and PSM.

Variables	(1)	(2)	(3)	(4)
	ESG	ESG	EBM	PSM
Placebo2016	0.0853 (0.0725)
Placebo2015		0.0862 (0.0780)
Policy			0.3165 *** (0.0631)	0.3007 *** (0.0693)
Treatpost	−0.1684 ***	−0.2084 ***	−0.3414 ***	−0.3374 ***
	(0.0270)	(0.0293)	(0.0295)	(0.0317)
Indpost	−0.2392 ***	−0.2721 ***	−0.4439 ***	−0.4240 ***
	(0.0561)	(0.0577)	(0.0510)	(0.0454)
Size	−0.0746 *** (0.0113)	−0.0908 *** (0.0123)	−0.1144 *** (0.0227)	−0.0605 ** (0.0256)
OPCash	−0.0116	0.0478	−0.0562	0.0251
	(0.1560)	(0.1540)	(0.1817)	(0.2000)
Fixratio	−0.0021	0.0201	0.0695	0.0004
	(0.0976)	(0.0960)	(0.0999)	(0.0981)
ROA	0.0160 **	0.0135 **	−0.0025	0.0034
	(0.0064)	(0.0059)	(0.0095)	(0.0089)
ROE	0.0027	0.0024	0.0039 *	0.0035
	(0.0021)	(0.0020)	(0.0022)	(0.0024)
Growth	0.0006 ***	0.0004 *	0.0003	0.0003
	(0.0002)	(0.0002)	(0.0002)	(0.0003)
ShrHold10	−0.0670	−0.1453 *	−0.1968	−0.2114
	(0.0774)	(0.0799)	(0.1515)	(0.1445)
Constant	0.4496 ***	0.5407 ***	2.7147 ***	2.5361 ***
	(0.0551)	(0.0550)	(0.4729)	(0.4095)
Observations	17,919	17,919	28,201	12,937
R-squared	0.5419	0.5475	0.4115	0.4564
Firm FE	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

show that the estimated coefficient is not significant after the implementation of the policy advanced, which indicates that the environmental protection fee-to-tax policy has no significant improvement effect on corporate ESR before the policy, and the benchmark result is robust.

5.4.2. Entropy Balance and Propensity Score Matching Method

In this paper, entropy balance (EBM) and propensity score matching (PSM) methods are used to correct the sample selection bias of environmental protection tax policy to a certain extent. The entropy balance matching method takes the control variable in the benchmark regression as the covariate and calculates the weight based on the maximum entropy, so as to improve the efficiency of covariate matching between the processing group and the control group. The propensity score matching method takes the control variables in the benchmark regression as the matching covariates and performs 1:2 nearest neighbor matching in a put-back way. These two matching methods can achieve the multi-dimensional balance of covariates between the treatment group and the control group, so as to ensure the randomness of the policy and enhance the effectiveness of the regression results. After using the two matching methods, the benchmark model (1) was regressed. The estimated results in columns (3) and (4) of Table 8 were significantly positive at the 1% level, which was consistent with the benchmark estimated results, further demonstrating the robustness of the benchmark regression.

5.5. Robustness Test

5.5.1. Replace the ESR Measurement Method

In this paper, we refer to the approach of Si and Cao [2] to replace the corporate ESR measure with “whether the firm develops or uses innovative products, equipment, or technologies that are beneficial to the environment”, “whether the firm has policies, measures or technologies to reduce emissions of waste gas, waste water, waste residue and greenhouse gases” and “whether the firm has green office policies or measures” in the CNRDS database. The scores of the three indicators were summed as the explanatory variables. This measurement method can reflect the corporate ESR in three aspects: front-end treatment, end-of-pipe prevention, and green office. The estimation results in

Table 9. Robustness test I: estimation results of the replacement ESR measure.

VARIABLES	(1)	(2)	(3)	(4)
	ESG	ESG	ESG	ESG
Policy	0.1756 ***	0.1768	0.0590 **	0.4305 **
	(0.0844)	(0.0915)	(0.0237)	(0.2037)
Treatpost	−0.0029)	−0.0084	−0.0732	0.0344
	(0.0258)	(0.0389)	(0.0780)	(0.0582)
Indpost	−0.1443 **	−0.1524 **	0.0429	−0.2445
	(0.0643)	(0.0719)	(0.0979)	(0.1525)
Size	0.8673	0.4205	3.1239 **	2.5942
	(0.7516)	(1.0439)	(1.4112)	(1.6505)
Fixratio	−0.2269	−0.1941	−0.3897 *	−0.1620
	(0.1671)	(0.1934)	(0.2264)	(0.3557)
ROA	0.4054	0.8346	0.6652	−1.0223
	(0.9851)	(1.0247)	(2.5811)	(1.5656)
ROE	−0.2126	−0.3582	−0.1128	0.1741
	(0.3764)	(0.4626)	(1.2350)	(0.6795)
Growth	−0.0443	−0.0043	−0.0133	−0.0898
	(0.0427)	(0.0533)	(0.0764)	(0.0687)
ShrHold10	0.0238	0.0043	0.3220	0.1750
	(0.1619)	(0.2163)	(0.4567)	(0.3372)
Constant	−28.8770 **	−41.6105 **	−25.2612	−8.6417
	(13.3398)	(19.4546)	(19.4649)	(23.2809)
Observations	7993	4102	1444	1903
R-squared	0.4364	0.4837	0.5319	0.5363
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

show that the environmental protection fee-to-tax policy improves corporate ESR in general, and the improvement effect is more significant for mature and decline-stage firms, while the effect is not significant for growth-stage firms. This is generally consistent with the benchmark results in Table 4, verifying the robustness.

5.5.2. Change the Life-Cycle Classification Method

In this paper, Anthony and Ramesh [34] use four indicators to measure the corporate life cycle, namely the growth in revenue, the capital expenditure rate, the retained earnings rate, and the firm age. Among them, the capital expenditure rate is measured by “(cash paid for fixed assets, intangible assets and other long-term assets + RandD expenses)/total assets in the current year” according to Hribar and Yehuda [40]. The retained earnings ratio is measured as “(surplus + undistributed earnings)/net assets”. Specifically, the growth in revenue rate and capital expenditure rate are ranked from highest to lowest, and the retained earnings rate and the firm age are ranked from lowest to highest. In addition, the sample is scored according to the third quartile of each indicator, and the composite score is calculated for the growth, maturity, and decline stages, respectively. The estimation results in

Table 10. Robustness test II: estimation results of changing the corporate life cycle classification Method.

VARIABLES	(1)	(2)	(3)	(4)
	Full Sample	Growth	Maturity	Decline
Policy	0.1766 *** (0.0712)	−0.0383	0.1800 **	0.1985 ***
		(0.1018)	(0.0713)	(0.0698)
Treatpost	−0.2453 *** (0.0209)	−0.1608 ***	−0.2114 ***	−0.3095 ***
		(0.0298)	(0.0208)	(0.0295)
Indpost	−0.3498 *** (0.0363)	−0.2870 ***	−0.3115 ***	−0.3503 ***
		(0.0494)	(0.0502)	(0.0457)
Size	−0.0746 *** (0.0113)	−0.0263 *	−0.0962 ***	−0.1042 ***
		(0.0156)	(0.0140)	(0.0269)
OPCash	0.0273 (0.1471)	−0.2921 *	0.0583	0.1794
		(0.1468)	(0.1683)	(0.2804)
Fixratio	0.0235 (0.0799)	−0.1643	0.0881	0.2934 *
		(0.1260)	(0.1114)	(0.1499)
ROA	0.0019 (0.0046)	0.0157 **	0.0031	0.0045
		(0.0076)	(0.0058)	(0.0069)
ROE	0.0022 (0.0014)	−0.0025	0.0016	0.0015
		(0.0029)	(0.0024)	(0.0023)
Growth	0.0003 ** (0.0001)	−0.0000	−0.0006 **	−0.0012 **
		(0.0002)	(0.0003)	(0.0005)
ShrHold10	−0.3824 ** (0.1574)	−0.0673	−0.1174	−0.2581 *
		(0.0933)	(0.1598)	(0.1452)
Constant	1.8709 *** (0.2787)	0.9751 **	2.4861 ***	2.7468 ***
		(0.3715)	(0.3432)	(0.6429)
Observations	28,201	8868	8771	8814
R-squared	0.4178	0.6561	0.5430	0.4014
Year FE	Yes	Yes	Yes	Yes
Firm FE	Yes	Yes	Yes	Yes

Note: ***, **, * denote estimated coefficients significant at 1%, 5%, and 10% level, respectively.

show that the environmental protection fee-to-tax policy significantly improves ESR in the mature and decline stages, but the policy effect on the mature stage is not significant, and the baseline estimation results are still robust.

6. Discussion

In the benchmark regression, we found that the tightening of environmental regulations brought about by the environmental protection fee-to-tax policy has effectively improved the level of corporate ESR, and is more significant for firms in maturity and decline stages. This may be because, on the one hand, the institutional change from pollution charges to environmental protection taxes has led to the improvement of the legal level and the increase of tax incentives, which has prompted firms affected by the policy to improve the utilization rate of production capacity and increase environmental protection investment, thus realizing the comprehensive green transformation [7,29], which is the concrete manifestation of firms’ active ESR. The conclusion is also supported by the research conclusions of other scholars. On the other hand, based on the enterprise life cycle theory, there are differences in the financial situation of enterprises at different life cycle stages. Previous scholars have found that after considering the heterogeneity of the time dimension, it is more helpful to comprehensively understand the policy effect when assessing the impact of tax incentives and financial technology on enterprise innovation [36,41]. However, there is a lack of research on the micro-effects of the environmental protection fee-to-tax policy from the perspective of the different life cycle stages. So, our research conclusions deepen the understanding of the effect of the environmental protection fee-to-tax policy.

There is significant heterogeneity in the impact of the environmental protection fee-to-tax policy on corporate ESR. First, the positive impact of the environmental protection fee-to-tax policy on the ESR level is more significant in state-owned firms. Specifically, state-owned firms bear a greater “social responsibility” to boost the economy and promote green and low-carbon transformation, so they are more willing to pay attention to green development, which is supported by Wu and Li [42]. Second, the positive impact of the environmental protection fee-to-tax policy on the ESR level is more significant among heavy polluting firms. After the implementation of the policy, heavily polluting firms are subject to more environmental supervision and change their strategic choice of undertaking ESR by affecting the cost of environmental compliance. This is in line with the conclusion of Ji and Su [43] that the internalization of firm environmental costs is for compliance purposes. Third, firms need to occupy a large amount of corporate resources to undertake ESR. If the degree of financing constraints is high, firms have the motivation to support their own green transformation by undertaking ESR to obtain more tax incentives from tax agencies and sufficient external funds from financial institutions. Therefore, the positive impact of the change of environmental protection fee-to-tax policy on corporate ESR level is more significant in firms with a higher degree of financing constraints. This is consistent with the research of Si and Cao [2], who believe that the tightening of financing constraints will improve the corporate ESR level.

7. Conclusions and Insight

How to motivate enterprises to take the initiative to assume environmental social responsibility and build a modern environmental governance system for sustainable development is an important issue facing the government at present. Using the data of listed firms from 2010–2020, this paper investigates the impact of environmental protection fee-to-tax policy on corporate ESR from the perspective of the corporate life cycle. The results show that, overall, the environmental protection fee-to-tax policy significantly improves the corporate ESR level. By the life-cycle stage, the environmental protection fee-to-tax policy significantly improved the corporate ESR in the maturity and decline stages, but the effect on the growth stage was not significant. The heterogeneous results by sample show that the environmental protection fee-to-tax policy significantly improves the corporate ESR level of SOEs, heavily polluting firms and firms with higher financing constraints in the maturity and decline stages, and also has a significant incentive effect on non-SOEs in the maturity stage. However, the impact of environmental protection fee-to-tax policy on the corporate ESR level of non-heavily polluting firms and firms with lower financing constraints is not significant in either the full sample or the sub-life cycle.

At present, countries around the world are facing the challenge of environmental pollution. All kinds of phenomena show that it is particularly important for firms to take the initiative to assume the main responsibility of environmental governance in order to fight the battle against pollution. By analyzing the relationship between the environmental protection fee-to-tax policy and corporate ESR, this paper helps to understand the influencing factors of corporate differentiated environmental behavior, guiding firms to strengthen the awareness of ESR, and improve environmental performance. In addition, it also provides important decision-making reference for the government to think about how to improve the awareness of a firm’s environmental responsibility, strengthen environmental legislation and law enforcement, and optimize the environmental protection tax policy system. To sum up, this paper has certain practical significance and application prospects.

The findings of this paper have important managerial implications and policy implications: first, it further optimizes the environmental protection tax policy system and promotes enterprises to take the initiative to assume ESR. The findings show that the environmental protection fee-to-tax policy can generally improve the corporate ESR. Specifically, the change from a low-regulation emission fee to a high-regulation environmental protection tax helps strengthen the ability of environmental protection tax policy to internalize pollution costs, enhance the incentive effect of market-led environmental regulation policy, and improve the overall awareness of environmental responsibility among firms.

Second, when formulating environmental protection tax policy that encourages firms to take the initiative to assume ESR, the firm’s types and life-cycle characteristics should be taken into account to form an effective incentive mechanism while exerting the constraining effect of environmental protection tax. This paper finds that environmental protection fee-to-tax policy has the greatest policy impact on mature firms, followed by decline firms, while the policy impact on growth firms is insignificant. This is mainly because the ESR level of growth firms is higher than that of mature and decline, and the mature and decline firms can obtain more financial resources and tax incentives for undertaking ESR. Therefore, it is difficult to achieve the green and coordinated development of all industries with a “one-size-fits-all” environmental protection tax policy. The government should further develop a differentiated incentive mechanism for environmental protection tax and give more tax incentives to firms with good performance in ESR, so as to change the concept of firms taking ESR as an additional operating cost, which will help improve the overall effectiveness of the environmental protection fee-to-tax policy. Of course, the environmental protection tax policy is mainly to guide firms to undertake ESR by affecting the cost of environmental pollution, but it is also important to maintain a firm’s capital market revenue to improve their ESR by improving the information disclosure system and stock market operation mechanism. Only when the costs and benefits of ESR are guaranteed can a firm’s willingness to take on social responsibility be truly increased, and the environmental protection tax policy can play its incentive role to the greatest extent.

Based on the life cycle theory, this paper examines the impact of the environmental protection fee-to-tax policy on corporate ESR and further analyzes the heterogeneous results under different corporate characteristics, but there are still some places for improvement in the research content. First, in terms of research and design, it is difficult to directly measure the policy’s affected “intensity” on firms due to the lack of firm-level pollution emissions and environmental tax data. The processing method in this paper alleviates the problem of inaccurate identification to some extent, but the use of a firm’s individual micro-data can further improve the evaluation effects of policy. Second, in terms of the impact mechanism, the specific mechanism was not analyzed in detail, such as how the environmental protection fee-to-tax policy changed a firm’s business cost and governance concept, thus affecting their behavior choices to assume ESR. These questions deserve further study in the future.