The Impact of Water Resources Tax Reform on Corporate ESG Performance: Patent Evidence from China

This paper uses a difference-in-differences approach to investigate how China’s water resources tax reform influences corporate Environmental, Social and Governance (ESG) performance. Drawing on a panel dataset of A-share listed companies from 2013 to 2023, we find that the reform significantly improves firms’ ESG ratings, a result that holds under multiple robustness checks. Mechanism tests reveal that this positive effect operates through enhanced green technological innovation, increased environmental investment, and heightened pressure from capital markets, with media attention further reinforcing these pathways. Heterogeneity analyses indicate that state-owned enterprises and larger firms experience particularly strong ESG improvements following the tax reform. These findings provide empirical evidence of the effectiveness of government-led environmental governance policies and offer practical insights for promoting green transformation in the corporate sector.