How Water Resource Tax Reform Shapes Corporate Green Investment: Evidence From Financing Capacity and Investment Willingness

Abstract Water scarcity poses an increasingly severe challenge to sustainable economic development, yet empirical evidence remains limited on how environmental taxation affects corporate green investment (GI) decisions and the micro‐level mechanisms through which these effects operate. Using Chinese A‐share listed firms from 2010 to 2024, this study exploits the 2017 expansion of China's water resource tax reform, a single policy shock varying across regions and industries, and applies a triple‐difference strategy to identify the causal effect of the policy on corporate GI. The results show that water resource tax reform significantly increases corporate GI, and this conclusion remains robust across robustness tests. Mechanism analysis reveals two complementary transmission channels. First, the reform improves firms' green financing capacity by expanding access to debt financing, equity financing, and green credit. Second, firms' willingness to invest in green projects is moderated by managerial characteristics and external environmental regulation. Heterogeneity analysis shows that the policy effect is more pronounced among firms with lower digitalization, higher fixed‐asset intensity, weaker pricing power, and lower market power. Investment‐structure decomposition indicates that the policy effect is concentrated mainly in end‐of‐pipe treatment investment, suggesting that future policy design should provide stronger incentives for preventive GI. Extended analysis further shows that the GI induced by the reform simultaneously increases total factor productivity and reduces water pollution equivalents, supporting the win‐win logic of the Porter hypothesis. These findings provide empirical evidence for improving the design of green fiscal and tax policies.