Carbon emissions trading system and corporate tax avoidance
Description
We selected companies listed on the Shanghai and Shenzhen stock exchanges from 2008 to 2020 as our initial sample. The list of companies participating in the ETS was obtained from the official websites of local Ecological Environment Bureaus and Development and Reform Commissions. Financial data were sourced from the China Stock Market & Accounting Research Database. The samples were processed as follows: (1) samples with missing data were excluded; (2) samples from the financial industry were excluded because of the special calculation and characteristics of financial statements; (3) samples from state-owned enterprises were excluded owing to their specific nature for tax avoidance; (4) companies identified as having special treatment were excluded to reduce the influence of outliers; and (5) winsorization was performed on continuous variables, truncating values at the 1st and 99th percentiles to eliminate the impact of outliers. Between 2013 and 2014, China launched pilot ETS in Shenzhen, Beijing, Shanghai, Tianjin, Guangdong, Hubei, and Chongqing. In 2016, Fujian and Sichuan also joined the pilot program. To define the treatment group, we referred to the list of companies covered by ETS published by local regulatory authorities, which clearly identifies companies joining the ETS. Companies not included in these lists were categorized as the control group. To address potential endogeneity issues, this study employed the propensity score matching (PSM) method to select the sample. Referring to Chen et al. (2018) and Chen et al. (2022), this study considered companies who are in pilot ETS as the treatment group (Treat = 1) and non-pilot companies as the control group (Treat = 0). Specifically, this study used the following variables to conduct 1:1 nearest neighbor matching without replacement on the sample: static non-systematic risk (ALTZ), asset return volatility (EV), systematic risk (BETA), leverage ratio (Lev), fixed asset ratio (PPE), intangible asset ratio (Intang), return on investment (ROI), research and development expenses (RND), whether the chairman and CEO are the same person (Dual), the shareholding proportion of the largest shareholder (Top1), firm size (Size), return on assets (ROA), book-to-market ratio (Bm), audit opinion (Audit), whether the firm is in a loss in previous year (Loss), provincial-level EPU (EPU), and proportion of executives with political connections (PC). Finally, 2,691 matched pairs of sample observations were obtained.