Environmental Protection Tax and Corporate Green Innovation Persistence: Evidence from China

Enhancing corporate green innovation persistence plays a vital role in shifting economic and social development toward greener, low-carbon models. This study treats the environmental protection tax (EPT) as an external institutional shock to the corporate green innovation system. Using data on Chinese A-share firms listed on the Shanghai and Shenzhen stock exchanges from 2014 to 2023, this study uses a difference-in-differences (DID) approach to estimate the impact of the EPT on corporate green innovation persistence and explore its underlying mechanisms. Corporate green innovation persistence is measured by combining the dynamic change in firms’ green innovation output with the current scale of their green innovation activities. The findings show that the EPT significantly enhances corporate green innovation persistence. Mechanism tests further show that the EPT significantly reduces firm uncertainty, eases financing constraints, and increases R&D investment, providing evidence consistent with the proposed expectation-stabilization, resource-access, and resource-allocation mechanisms. Heterogeneity analysis further reveals that the positive effect is more pronounced among firms facing lower industry competition, firms with greater institutional investor ownership, state-owned enterprises, firms with higher information transparency, non-high-tech firms, and firms whose executives exhibit a stronger risk-taking propensity. These results provide empirical evidence for strengthening the long-term innovation-guiding role of the EPT and offer policy insights into corporate sustainable development from a coordinated perspective of institutions, resources, and firm behavior.