Has the Environmental Tax Reform Encouraged Companies to Invest Across Regions?—Evidence from Chinese Listed Companies

Against the dual backdrop of the global green transition and China’s construction of a unified national market, the impact of environmental policies on the spatial allocation of capital has emerged as a core concern for academic researchers and policymakers alike. China’s implementation of the Environmental Protection Tax Law in 2018 completed the historic transition from the long-standing pollution discharge fee system to a formal environmental tax regime. While differentiated interprovincial tax rates under the new regime have the potential to reshape cross-regional capital flow patterns, existing literature lacks systematic micro-level empirical evidence regarding how environmental tax reform affects firms’ cross-regional investment and the underlying mechanisms driving such effects. This study constructs a sample of Chinese A-share-listed firms covering the period 2012 to 2024 and applies the difference-in-differences (DID) method to systematically examine the causal impact, transmission channels, and heterogeneous boundary conditions of environmental tax reform on firms’ cross-regional investment. The baseline estimation results confirm that environmental tax reform significantly stimulates cross-regional investment activities among firms located in provinces that raised environmental tax rates after the reform. This core conclusion remains robust across a series of validity checks, including parallel trend assumption tests, placebo tests, propensity score matching combined with difference-in-differences (PSM-DID) estimation, and the exclusion of confounding effects from contemporaneous policy interventions. Mechanism analysis identifies two core transmission channels through which the reform exerts its effects: rising pollution abatement costs and alleviation of corporate financing constraints. Further heterogeneity tests reveal that the promoting effect of the reform on cross-regional investment is more prominent for capital-intensive firms and firms located in regions with lower fiscal pressure and firms operating in regions with stricter environmental law enforcement. This study provides new micro-level empirical evidence supporting the applicability of both the pollution haven hypothesis and the Porter hypothesis in the Chinese institutional context and offers actionable policy insights for optimizing the design of the environmental tax system, guiding corporate green transformation, and facilitating coordinated regional development.