Journal of Cleaner Production 385 (2023) 135647

Contents lists available at ScienceDirect

Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

The spillover effect of investment incentives on corporate social

responsibility: Firm responses to accelerated depreciation
Lexin Zhao a, b, 1, *, Gang Peng c, 1, **
a
School of Economics, Zhejiang University, Hangzhou, China
b
Institute for Fiscal Big-Data & Policy of Zhejiang University, Hangzhou, China
c
School of Statistics, Southwestern University of Finance and Economics, Chengdu, China

A R T I C L E I N F O A B S T R A C T

Handling Editor: Jian Zuo This paper aims to explain the causal relationship between accelerated depreciation policy (ADP), a worldwide
used tax incentive, and corporate social responsibility (CSR) performance. We employ China’s ADP as a quasi-
JEL classification: natural experiment and use a difference-in-differences (DID) specification to explore the policy effects on CSR
D22 performance. Based on the data of China’s A-share listed companies from 2010 to 2019, we find that ADP would
G38
increase CSR performance by easing corporate financing constraints and improving firm performance. Besides,
H25
the policy effects are more pronounced on firms facing stronger market competition and firms with better
M14
corporate governance. These results suggest that ADP can be an incentive for CSR engagement and highlight the
Keywords:
significance of improving marketization to make tax policies effective.
Sustainable development
Tax incentives
Financial constraints
Firm performance

1. Introduction institutional pressure from government supervision (Wang et al., 2019),

Corporate social responsibility (CSR) is “a concept whereby com­
panies integrate social and environmental concerns in their business
operations and in their interaction with their stakeholders on a volun­
tary basis” (European Commission, 2001), suggesting that CSR is closely
related to business ethics and sustainability. Nowadays, it has become a
vital tool for businesses all over the world to interact with their stake­
holders, promote brand perception, and gain a competitive advantage
(Kuo et al., 2021). As documented by prior studies, engaging in CSR
activities could ease firms’ financial constraints (Cheng et al., 2014;
Oikonomou et al., 2014), reduce firms’ credit risk (Bannier et al., 2022),
promote firm innovation (Hao and He, 2022; Wang et al., 2022),
enhance investment efficiency (Samet and Jarboui, 2017), increase the
value-added in the supply chain (Hsu et al., 2022), and thus improve
corporate financial performance (Okafor et al., 2021). Given the
growing importance of CSR, previous studies have broadly investigated
the determinants of CSR performance from multiple perspectives such as
institutional ownership (Dyck et al., 2019; Cheng et al., 2022),
share pledging (Li et al., 2021), political environment (Di Giuli and
Kostovetsky, 2014; Kong et al., 2021), green credit policy (S. Li et al.,
2022), high-speed rail (H. Li et al., 2022), and institutional investors’
site visits (Zhou and Gan, 2022). But what remains unclear is whether
and how tax incentives affect CSR performance. This study aims to fill
this void.
Tax incentives are a vital tool used by worldwide governments to
encourage company investment and boost the economy. One of them,
unlike reducing statutory tax rates or providing tax exemptions, accel­
erated depreciation policy (ADP) provides enterprises with immediate
cash flow benefits by allowing them to write off deductions of capital
expenditures more quickly and thus is always favored by policymakers
(Fan and Liu, 2020). During 2004–2016, at least 41 countries (econo­
mies) worldwide utilized ADP to encourage corporate fixed investment
(Steinmüller et al., 2019). As the policy became more widely adopted,
many researchers started to pay it more attention and evaluated its
impacts from a variety of perspectives, including its investment effects,
labor market effects, leverage effects, and firm performance effects.

* Corresponding author. School of Economics, Zhejiang University, Hangzhou, 310058, China.

** Corresponding author. School of Statistics, Southwestern University of Finance and Economics, Chengdu, 611130, China.
E-mail addresses: zhaolx@zju.edu.cn (L. Zhao), penggang2016@swufe.edu.cn (G. Peng).
1
The authors contribute equally.

https://doi.org/10.1016/j.jclepro.2022.135647
Received 15 August 2022; Received in revised form 20 November 2022; Accepted 15 December 2022
Available online 20 December 2022
0959-6526/© 2022 Elsevier Ltd. All rights reserved.
L. Zhao and G. Peng
However, no one has expanded the research on ADP to the field of
sustainability, even though sustainable development is becoming a
higher priority in global development (Derlukiewicz et al., 2020). We
attempt to fill this research gap by exploring the effects of ADP on CSR
performance. Taken together, this study aims to employ the ADP as a
policy experiment to examine the impacts of tax incentives on CSR
performance, contributing to the above two bodies of literature.
CSR engagement is essentially a particular type of long-term in­
vestment that may not immediately yield rewards (Brammer and Mill­
ington, 2008; Kitzmueller and Shimshack, 2012). Thus, corporate
decisions on CSR activities may highly depend on corporate internal
funds than external ones (Hall, 2002; Orlitzky et al., 2003; Chang et al.,
2020). Related to the nature of accelerated depreciation, ADP would
increase corporate internal funds by providing additional cash flows for
firms (Zwick and Mahon, 2017; Fan and Liu, 2020; Zhao and Fang,
2022) and improving firm performance (Lin and Liu, 2022; Yu et al.,
2022). Therefore, standing on slack resource theory, we propose the first
hypothesis that ADP would promote firms to engage in CSR activities
and thus improve CSR performance. This hypothesis provides the
expectation on the relationship between tax incentives and CSR per­
formance, while it does not shed light on why firms would convert the
policy bonus to improve their CSR performance. Actually, existing
literature has made some explanations for the question, and the widely
accepted one is that CSR practices can be regarded as a competitive
strategy that helps firms to acquire advantages against their competitors
(Gandullia and Piserà, 2020; Chang et al., 2020). Combined, we put
forward the second hypothesis that the policy effects on CSR perfor­
mance are more pronounced for firms facing greater market
competition.
To test the aforementioned theoretical hypotheses, we use China’s
ADP as a quasi-natural experiment and conduct the empirical analysis
using the difference-in-differences (DID) framework and a sample of
China’s listed companies from 2010 to 2019. Meanwhile, we employ the
CSR score from both the Hexun scoring system and Rankins ranking
(RKS) system, which are the only two available ranking systems for
China’s listed companies, to measure CSR performance. The main
reason why we use China as the research setting is that ADP in some
developed countries such as the U.S. is always designed nationwide
rather than targeted at specific industries or regions, making the treated
and untreated groups unclear. But China’s ADP is well defined in in­
dustry and time dimensions, thus we can clearly determine the treat­
ment group, which further ensures the validity of our identification
strategy. Specifically, on October 20, 2014, the Chinese government
announced that firms in six pilot industries could deduct their fixed-asset
expenditure faster. On September 17, 2015, the policy was expanded to
the other four sectors, and then it was implemented across all
manufacturing industries from January 1, 2019. Hence, we can identify
the policy effects by comparing the pilot industries with the unqualified
industries.
Furthermore, we also introduce firm fixed effects and the year fixed
effects into our DID framework. The former is used to control for all
time-invariant influential factors of each firm, and the latter helps
control for time-varying and nationwide shocks to all firms. In this way,
in baseline regression, we actually employ a two-way fixed effects DID
(TWFE-DID) estimator to identify the policy effects on CSR performance.
Then we also use the Bacon decomposition method proposed by Good­
man-Bacon (2021) to check the reliability of our DID estimator and
replace the ADP dummy with a set of event-time dummies and conduct a
panel event study analysis to examine the common trend assumption. In
addition, we perform a placebo test by randomly assigning the treatment
status to companies to determine whether the policy effects are driven
by the actual ADP and not by chance.
The rest of this paper is organized as follows. Section 2 introduces
China’s accelerated depreciation policy. Section 3 reviews the related
literature and proposes the hypothesis. Section 4 presents the empirical
design. Section 5 presents the empirical results. Section 6 concludes the
2
Journal of Cleaner Production 385 (2023) 135647
paper.
2. China’s accelerated depreciation policy
The annual depreciation of fixed investments is dependent on the
depreciation method and depreciation duration. Article 59 of Imple­
menting Regulations of the Law of the People’s Republic of China on Enter­
prise Income Tax (henceforth, IRL) stipulates that companies cannot
instantly deduct their whole capital expenditure at the date of acquisi­
tion, while they are allowed to linearly write off their capital expendi­
ture during the depreciation period for each type of fixed asset. As for
the depreciation period, Article 60 of the IRL classifies a firm’s fixed
assets into five categories and stipulates standard depreciation periods
for each type of fixed asset. For instance, the standard depreciation
period for buildings and structures is 20 years, and that of electronic
equipment is 3 years.
To encourage equipment investment and replacement, the Ministry
of Finance and the State Administration of Taxation of China jointly
issued the “Notice on Improving the Corporate Income Tax Policy for
Accelerated Depreciation of Fixed Assets” (Caishui [2014] No. 75) and
allowed firms in six pilot industries to deduct their fixed assets faster
after January 1, 2014, by shortening the asset depreciation period to
60% of the corresponding standard deduction period (i.e. 60% term),
leveraging the double-declining balance method (i.e. DDB) or the sum-
of-the-years’-digits method (i.e. SYD). On September 17, 2015, the
policy was expanded to the other four sectors including light industry,
spinning and weaving, machinery, and automobiles (Caishui [2015] No.
106). Based on Announcement No.66 of the State Administration of
Taxation of the Ministry of Finance in 2019, this policy has been applied
across all manufacturing industries since January 1, 2019.
With the enactment of this policy, the firm in pilot industries can
deduct more capital expenditure from their taxable income in the earlier
years of the corresponding standard deduction period, which is equiv­
alent to the firm obtaining an interest-free loan from the government.
Specifically, following Garrett et al. (2020), we can present the policy
bonus as follows:
∑
T
( )
Bonus0T =
τ
× Dt Bonus − Dt baseline × 1(Firm is Taxable)t , (1)
t− 1
t=1 (1 + r)
where T is the depreciation period of fixed assets; τ is the corporate
income tax rate, and Dt Bonus 、 Dt baseline are the depreciation of one-unit
fixed-asset investment at time t under the optimal accelerated depreci­
ation and straight-line methods, respectively. 1(Firm is Taxable)t is an
indicator function, if a firm’s tax status is positive, it takes the value of 1,
otherwise, it is 0. Obviously, the firms with a positive tax position could
obtain more policy bonuses, relative to their counterparts, because they
can immediately save cash flows from tax payments. Meanwhile, the
larger T, the greater Bonus0T , the greater the policy bonus, and the more
interest-free loans from the government. Take a firm with a positive tax
position as an example, given that China’s corporate income tax rate (τ)
is 25% and the discount rate (r) is 7% (Zwick and Mahon, 2017), the
bonus from a one-unit fixed-asset investment with a standard depreci­
ation period of five years (Bonus05 )2 is 0.0146, meaning that the gov­
ernment provides 0.0146 unit interest-free loans for a firm investing one
unit of fixed assets. And, that of the investment with a standard depre­
ciation period of ten years (Bonus010 ) is 0.0246.
3. Literature and hypothesis development
Governmental organizations and consumers have both placed an
2
When standard depreciation period (i.e. T) is 5 years, the optimal acceler­
ated depreciation pattern is 60% term.
L. Zhao and G. Peng
increasing amount of emphasis on CSR activities since the late last
century as a result of deteriorating business ethics (Hsu et al., 2022).
Actually, the concept of CSR has been the subject of theoretical discus­
sion for quite some time (Lu and Zhu, 2021). Expert in CSR, Eklington
(1998) put forward a novel notion called the “Triple Bottom Line (TBL)”,
suggesting that firms should not only maximize profits but also fulfill
basic environmental and social responsibilities. As the idea of CSR
gradually developed and matured, the widely acknowledged definition
of CSR is “a concept whereby companies integrate social and environ­
mental concerns in their business operations and in their interaction
with their stakeholders on a voluntary basis”, proposed by the European
Commission (2001). Nowadays, CSR has developed into a crucial tool
for businesses all over the world to interact with their stakeholders,
strengthen their brand perception, and gain a competitive edge (Kuo
et al., 2021). Meanwhile, CSR has even been employed to fulfill the
excess needs of social responsibility beyond the capabilities of the
government (Jamali, 2006; Kacem and Brahim Omri, 2022). Given how
important CSR is, many studies have already been done on the subject,
such as the literature on the factors that affect CSR performance, which
is one of the areas of literature that is most relevant to this study. In the
rest of this section, we first turn to review the literature most related to
our study, then construct a theoretical framework to expound on how
ADP affects CSR performance and propose the hypotheses.
3.1. Related literature
In terms of research topic, this study is closely related to two main
bodies of literature. The first strand of literature discusses the de­
terminants of CSR performance. Due to the increasing significance of
CSR, there are a growing number of studies on its determinants, and
these studies have primarily concentrated on the effects of ownership
characteristics, external political context, and taxation on CSR practices.
Using the data of listed Spanish firms, Pucheta-Martnez and
López-Zamora (2018) conclude that the controlling shareholders’ rep­
resentatives on boards can influence CSR strategies, and Dyck et al.
(2019) conclude that institutional investors are one of the driving forces
behind the adoption of CSR practices, based on the international evi­
dence. Cheng et al. (2022) investigate the impacts of common institu­
tional ownership on CSR performance and present a negative
relationship between these two terms. The political environment is also
one of the key elements that influence CSR performance. Di Giuli and
Kostovetsky (2014) demonstrate that the CSR performance of companies
headquartered in democratic states exceeds that of their counterparts.
Kong et al. (2021) demonstrate that political promotion incentives
improve local firms’ CSR performance by providing subsidies and tax
preferences. Recently, Li et al. (2021) study the link between share
pledge and CSR using data from China’s listed enterprises and conclude
that share pledge inhibits CSR engagement via risk-taking and agency
cost channels. S. Li et al. (2022) document the positive effects of green
credit policy on CSR performance, and H. Li et al. (2022) find that
high-speed rail contributes to promoting CSR engagement. Zhou and
Gan (2022) use the firm-level data of China’s listed enterprises to
examine the causal link between institutional investors’ site visits and
CSR performance, and they find that institutional investors’ site visits
would improve CSR performance through the channels of monitoring
and information acquisition.
Additionally, taxation is the other element affecting CSR perfor­
mance, and our study is most directly related to the sub-strand of
literature on the relationship between taxation on CSR performance. In
the Chinese setting, Xu and Zeng (2016) demonstrate a negative asso­
ciation between the effective tax rate and CSR performance, whereas Lu
and Zhu (2021) reach the opposite conclusion. The net effects of tax
expenses on CSR performance, according to Lu and Zhu (2021), are
driven by both “crowding-in” and “crowding-out” effects. They use state
subsidies as an additional explanatory variable to isolate the net effect
and find that the crowding-in effect outweighs the crowding-out effect;
3
Journal of Cleaner Production 385 (2023) 135647
hence, tax expenses are positively associated with CSR performance.
Based on firm-level data from 15 European countries, Gandullia and
Piserà (2020) use the instrumental variable method to analyze the
impact of tax expenses on CSR performance and show a negative cor­
relation between tax expenses and CSR scores. In contrast to the studies
mentioned above, subsequent research pays more attention to certain
specific events of tax rate changes, which provide quasi-natural exper­
iment settings and thus help identify the causal link between taxation
and CSR performance.
Chang et al. (2020) employ the variation in corporate income tax
rates across U.S. states and use a DID framework to explore the effect of
corporate income tax on CSR performance. They reveal an asymmetric
effect of the tax rate change on CSR, with tax cuts having a positive effect
and tax increases having a negligible effect. Kacem and Brahim Omri
(2022) examine the impacts of tax reduction for corporate social re­
sponsibility in Tunisia on CSR performance and conclude that the tax
cuts do not have the desired effect. Taken together, even though the
above studies have tried to figure out how tax expenses or tax rate re­
ductions affect CSR performance, there is still no agreement on the di­
rection of the relationship between taxes and CSR performance.
Moreover, no research has carefully investigated the impacts of accel­
erated depreciation, a worldwide used tax incentive, on CSR perfor­
mance. This study tries to fill this empirical void.
Second, this study is closely related to the literature emphasizing the
effect of ADP (including U.S. bonus depreciation, U.K. first-year capital
allowances, China’s accelerated depreciation, and so on) on corporate
behaviors. Governments throughout the world commonly use ADP to
encourage investment since it is widely believed that ADP will drive
firms to invest in the short term (Fan and Liu, 2020). And most previous
studies on the investment effects of ADP have indeed documented the
positive relationship between accelerated depreciation and firm in­
vestments. House and Shapiro (2008) use quarterly panel data of in­
vestment quantities and prices covering 1959 to 2005 to examine the
impact of the temporary bonus depreciation allowance of the U.S. in
2003, which allows businesses to write off a larger portion of their in­
vestments in the current year, on firm investments. They conclude that
bonus depreciation appears to have positive effects on investment and
estimate the elasticity of investment supply to be between 10 and 20.
Similarly, Zwick and Mahon (2017) also find that the bonus depreciation
policy in the U.S. during both the years 2001–2004 and the years
2008–2010 positively affect firm investments. Zwick and Mahon (2017)
further conduct a series of heterogeneity tests relying on financing
constraints to shed more insight into the mechanisms underlying the
positive link between bonus depreciation and firm investments. They
find that the positive policy effects are more pronounced for firms with
stronger financial constraints. Ohrn (2019) comprehensively examines
the investment effects of two federal policies, that is, bonus depreciation
and Section 179 expensing, and finds that these two policies boost in­
vestment apparently, but their interaction effect is significantly nega­
tive. Maffini et al. (2019) employ the change in first-year capital
allowances as a quasi-natural experiment to explore the investment ef­
fects of accelerated depreciation and provide solid evidence for the
positive impacts of ADP on firm investment based on the UK corporation
tax returns. Using a detailed firm-level dataset of China, the world’s
largest developing country, Fan and Liu (2020) reconfirm the positive
effects of ADP on corporate investment, and further emphasize the sig­
nificance of enhancing tax compliance to maximize the effectiveness of
tax policies.
In a more recent contribution, Cui et al. (2022) re-examine the in­
vestment effects of China’s ADP with confidential corporate tax returns
and point out that firms only implement the accelerated depreciation
methods on less than 20% of eligible investments, suggesting that the
investment-encouraging impact of ADP is not so readily apparent.
Meanwhile, the existing literature also touches on ADP’s labor market
effects and leverage effects. The former concludes that the ADP induces
an increase in employment, total earnings for employees (Garrett et al.,
L. Zhao and G. Peng
2020), and the relative demand for skilled labor (Zhao and Fang, 2022).
The latter did not reach a consensus. Based on numerical analysis,
Panteghini and Vergalli (2016) claim that firms available to bonus
depreciation would experience a decline in firm leverage and default
risk. However, Du et al. (2022) provide empirical evidence that China’s
ADP has positive impacts on corporate leverage and maturity mismatch
between investment and financing. In addition, Lin and Liu (2022) and
Yu et al. (2022) further document the positive effects of China’s ADP on
firm performance. Combined, existing studies on ADP mainly focus on
evaluating its economic consequences, yet there is no one shedding light
on CSR performance, which is closely related to business ethics and
sustainability.
3.2. Hypothesis development
CSR can actually be regarded as an investment in special assets
rather than a pure form of corporate expenditure, which is a long-term
investment in nature and may not realize returns in the short run
(Brammer and Millington, 2008; Kitzmueller and Shimshack, 2012).
Consequently, it is challenging to give financial support through
external financing for engaging in CSR activities (Orlitzky et al., 2003;
Chang et al., 2020). Thus, corporate decisions on CSR would be heavily
dependent on their internal funds (Hall, 2002), with an increase in in­
ternal funds encouraging the firm to engage in CSR activities and a fall in
internal funds inhibiting CSR involvement (Sun and Gunia, 2018; Kong
et al., 2021). As described in Section 2, after policy enactment, firms in
the pilot industries can deduct their capital expenditure faster. This is
equivalent to the fact that the government provides interest-free loans
for firms. Directly speaking, businesses might reduce cash outflows for
tax payments in the earlier investment periods after the implementation
of ADP (Cui et al., 2022). In this manner, from the standpoint of business
continuity and continuing investment, ADP actually provides enter­
prises with additional cash flows and alleviates finance and cash flow
limitations (Zwick and Mahon, 2017; Fan and Liu, 2020; Zhao and Fang,
2022, so-called “cash flow effect”).
Putting the cash flow effect of ADP aside, ADP also affects corporate
decisions about CSR by enhancing firm performance. To be specific, as
the existing literature documented, ADP promotes fixed investment
(Zwick and Mahon, 2017; Maffini et al., 2019; Ohrn, 2019; Fan and Liu,
2020), induces R&D investment (Cao and Chen, 2017; Li et al., 2017),
increases corporate relative demand for skilled labor (Zhao and Fang,
2022), has a positive impact on firm innovation (Lin and Liu, 2022), and
also enhances firm productivity (Liu and Lv, 2018; Li and Zhao, 2021).
According to these positive policy effects, we have reason to believe that
ADP could increase business profitability. In other words, the firms
eligible for accelerated depreciation may have greater firm performance
than the untreated firms (so-called “firm performance effect”). In fact,
several recent studies on ADP have directly shown its positive effect on
corporate performance. Lin and Liu (2022), while analyzing the effects
of China’s ADP on business innovation, additionally evaluate its effect
on corporate performance and conclude that accelerated depreciation
would increase both returns on total assets and returns on equity. Yu
et al. (2022) investigate the effects and mechanisms of China’s ADP on
the performance of small and medium-sized companies (SMEs) and
suggest that accelerated depreciation increases company performance.
Taken together, ADP would increase corporate internal capital from
the perspective of both the cash flow effect and the firm performance
effect. Hence, standing on slack resource theory, firms subject to
accelerated depreciation are more likely to invest in greater sustain­
ability practices such as CSR activities. Based on the above analyses, we
propose the following hypothesis.
Hypothesis 1. Accelerated depreciation has positive effects on CSR
performance.
Unknown till now is why companies would want to convert the
policy bonus to enhance their CSR performance. Existing evidence
4
Journal of Cleaner Production 385 (2023) 135647
suggests that engagement in CSR activities may be rewarded in
numerous ways, such as alleviating financial constraints (Cheng et al.,
2014; Oikonomou et al., 2014), improving investment efficiency (Samet
and Jarboui, 2017), enhancing financial performance (Okafor et al.,
2021), and boosting firm competitiveness (Flammer, 2015). Among
many, firm competitiveness is the most prevalent reason for corpora­
tions to engage in CSR activities (Gandullia and Piserà, 2020; Chang
et al., 2020). Specifically, engagement in CSR practices can be viewed as
a competitive strategy that helps businesses to acquire an advantage
against their competitors. Flammer (2015) employs import tariff re­
ductions in the U.S. manufacturing sector, which increases firms’
competitive pressure from abroad, as a quasi-natural experiment to
investigate the impact of market competition on CSR performance. They
find that the increase in market competition induced by tariff reductions
encourages enterprises to engage in CSR activities, supporting the view
that CSR always acts as a competitive strategy. Lu et al. (2020) develop a
conceptual framework to interpret the relationship between CSR and
firm competitiveness and test the model predictions using survey data
from Lithuanian companies. They demonstrate that CSR has a positive
impact on several separate elements of firm competitiveness including
the firm’s image, reputation, and the satisfaction of customers’ needs.
Hsu et al. (2022) build a conceptual framework on the basis of on O-ring
theory to interpret the relationship between CSR activities and
value-added in the supply chain and then provide empirical evidence for
the model predictions, indicating that engagement in CSR activities
would “pay to be good” in the supply chain. Related to these analyses,
we can refer that the reason why firms prioritize CSR activities when
they are available to the policy bonus is enhancing firm competitiveness.
If this is the case, we should notice that enterprises that are subject to
more intense market competition are more driven to participate in CSR
activities after the implementation of ADP. Thus, combined with Hy­
pothesis 1, we propose the following hypothesis.
Hypothesis 2. The positive effects of accelerated depreciation on CSR
performance are more pronounced in firms that face greater market
competition.
4. Sample and methodology
4.1. Sample selection
Considering the availability of CSR data, we use the annual report
data of all China’s A-share listed companies from 2010 to 2019 as an
initial sample. We then conduct the following data-cleaning process to
make the sample more reasonable. First, we exclude financial companies
because of the differences in accounting principles between these firms
and non-financial companies. Second, we drop the companies labeled ST
or *ST. Third, we remove the companies listed after 2014 to resolve the
potential sample bias problem, considering that ADP was enacted in
2014. After that, we obtain a sample of 2152 firms, including 1452
treated firms and 700 untreated firms. More specifically, there are 495,
607, and 350 firms affected by the 2014, 2015, and 2019 rounds of ADP,
respectively.
We download financial data from the Wind Database and the China
Stock Market & Accounting Research Database (CSMAR). CSR scores
used in baseline regression are from the Hexun website.3 RKS ranking
scores for robustness checks are offered by Runlin Global Consulting
Limited Company.4
4.2. Empirical strategy
ADP is a tax incentive with a long history and is used worldwide,
3
http://stockdata.stock.hexun.com/zrbg/.
4
http://www.rksratings.cn/.
L. Zhao and G. Peng
existing literature generally employs the DID method to evaluate the
policy effects of ADP. The U.S. first implemented ADP in 1954 by
allowing firms to employ the DDB and SYD patterns, and the recent form
of ADP in the U.S. is the bonus depreciation, which allows firms to write
off more percentage of capital costs in the current period of investment.
Such bonus depreciation is not confined to any one sector or area, thus
the studies on U.S. bonus depreciation generally identify the treated
group based on bonus depreciation intensity (Zwick and Mahon, 2017;
Ohrn, 2019; Garrett et al., 2020). Specifically, these studies identify the
policy effects by employing the DID technique to compare the group
with higher policy intensity and the group with lower policy intensity.
But this identification practice would face the following challenges.
First, the potential measurement error of policy intensity may impair the
validity of our findings (Zhao and Fang, 2022). Second, the group with
lower policy intensity is also affected by the policy, thus it is not a good
control group, making the DID method no longer applicable (Good­
man-Bacon, 2021). Meanwhile, using the DID method to evaluate the
first-year depreciation allowances in the UK also seems inappropriate,5
because firms could strategically sort into treatment group hence mak­
ing the comparison between the treatment group and control group
invalid.
As shown in Section 2, ADP in China allows firms to use DDB, SYD
methods or shorten the depreciation period and is well defined in the
industry and time dimensions, thus we can clearly identify the treated
and the untreated industries. Moreover, due to the novelty of the ADP in
China, it is unlikely that companies would be prepared for it. In other
words, China’s ADP is likely unexpected, which has been demonstrated
by the search intensity index related to the policy (see Cui et al., 2022).
Taken together, China’s ADP serves as a pretty good policy experiment,
providing us with an opportunity to examine the causality link between
investment tax incentives and CSR performance with the DID method.
Hence, referring to Cui et al. (2022), Zhao and Fang (2022), and Fan and
Liu (2020), we identify the effects of ADP on CSR performance using the
following staggered DID framework:
yit = α + βADPit + γXit + δZj • t + αi + λt + εit , (2)
where i, j, and t denote firm, industry, and year, respectively; yit denotes
the CSR performance of firm i in year t. ADPit is equal to Treati × Postit ,
and its coefficient reflects the average effect of ADP on the CSR per­
formance of treated firms compared with their counterparts. Postit is the
post-policy dummy, equal to 1 if t ≥ ti0 where ti0 is the year that firm i
began to be affected by the policy and 0 otherwise. Treati = 1 if firm i is
affected by the policy and 0 otherwise. αi and λt are firm and year-fixed
effects, respectively. By adding firm-fixed effects, we control for all time-
invariant influential factors of each firm, and year-fixed effects are used
to control for time-varying and nationwide shocks to all firms. εit is the
error term. We cluster the standard errors at the firm level in the baseline
regression and also report the results clustered at other levels in the
robustness tests (see Table 5).
Xit is a set of corporate controls that have been identified in the
relevant literature as having an impact on CSR. First, extant studies on
the determinants of CSR performance (Wang et al., 2019; Gandullia and
Piserà, 2020; Li et al., 2021) show that the basic characteristics of an
enterprise, such as firm size, capital structure, and profitability, are
correlated with CSR ratings, indicating that these factors may affect a
firm’s CSR decisions. Hence, we include three variables namely Size,
Leverage, and ROA, in Equation (2).6 Second, Pucheta-Martínez and
López-Zamora (2018) document that controlling shareholders’
5
First-year depreciation allowances can only be claimed by companies that
meet the qualification requirements for turnover, assets, and employees (Maf­
fini et al., 2019). As a result, companies can manipulate their financial state­
ments to make them meet the requirements.
6
See Table 1 for the details of variable definition.
5
Journal of Cleaner Production 385 (2023) 135647
representatives on boards can affect CSR strategies, and Dyck et al.
(2019) point out that institutional investors are one of the driving forces
behind engaging in CSR practices. Thus, in the baseline regression
model, we further control for the shareholding ratio of institutional in­
vestors (i.e. Institutional) and the shareholding ratio of controlling
shareholders (i.e. Controllingholder). Third, to consider the effects of
other types of investment, especially capital investment into account
(Chang et al., 2020; Lu and Zhu, 2021), we add a variable (i.e. CapInvest)
measuring capital investment into Equation (2). Finally, to control for
the confounding effect of another tax reform, which is implemented
during our sample period and replaces China’s business tax system with
the value-added tax (VAT) one, we include a dummy, that is, VATit into
Equation (2), where VATit = 1 if firm i in year t has already been affected
by the VAT reform, and 0 otherwise.
In addition, given that the treatment status is defined at the industry
level, we further include a set of industry-level controls, i.e. Zj , inter­
acting with linear time trends to control for the differential trends across
industries and ensure the validity of our identification strategy. Specif­
ically, Zj includes the pre-policy mean of Size, Leverage, ROA, and Cap­
Invest at the two-digit industry level.
4.3. Variables
We use the CSR scores listed on the Hexun website, which have
already been extensively used in related literature, to assess their CSR
performance (e.g., Wang et al., 2019; Li et al., 2021; Lu and Zhu, 2021).
The Hexun CSR scoring system not only provides a total score of CSR
performance for each firm but also publishes the details of the
sub-indicators that constitute the total score. Specifically, the total score
of CSR consists of five Level-1 sub-indicators, including shareholder
equity responsibility (HXSE), employee responsibility (HXEM), supplier,
customer, and consumer rights responsibility (HXSCC), environment
responsibility (HXEN), and society contribution value (HXSCV). HXSE
refers to realizing corporate value maximization; HXEM relates to pro­
tecting the rights and interests of employees; HXSCC means a firm
should build good partnerships with other businesses and provide
high-quality products and services for consumers; HXEN suggests that
the firm should use an environment-friendly production technology and
protect the environment; HXSCV implies that a firm should comply with
tax laws and actively participate in charitable activities. Furthermore,
there is another CSR score system for China’s listed companies, the
Rankins ranking (RKS) system. However, as claimed by Lu and Zhu
(2021), the RKS system targets only a small fraction of all listed com­
panies, while the Hexun system depicts the yearly CSR performance of
all listed companies. Hence, in the baseline regression, we use the CSR
score from the Hexun scoring system to measure CSR performance to
examine the policy effects with a large sample. Meanwhile, in the
robustness test (see Section 5.2.1), we also use the CSR rating from the
RKS system to measure CSR performance (i.e. RKSCSR).
Table 1 shows variable definitions and descriptive statistics of all
variables. It is worth mentioning that we deflate all monetary value
variables using the provincial-level producer price index of industrial
products.7 Meanwhile, to mitigate the impact of outliers, we winsorize
all continuous variables at their 1st and 99th quantiles.
5. Empirical results
5.1. Baseline regression
Table 2 shows the estimated results based on Equation (2) and in­
dicates the average effects of a policy on the CSR performance of treated
enterprises in comparison to firms in the control group. We start the
7
The data of this index are source from National Bureau of Statistics of China
(http://www.stats.gov.cn/).
L. Zhao and G. Peng Journal of Cleaner Production 385 (2023) 135647

Table 1 Table 1 (continued )

Variable definition and summary statistics. Variable Definition Observations Mean SD
Variable Definition Observations Mean SD
Pre-policy mean of ROA
Treat = 1 if a firm was 21,520 0.675 0.468 at two-digit industry
affected by the policies; level, percent.
= 0, otherwise. Indleverage Pre-policy mean of 21,480 55.118 11.150
ADP = 1 if a firm was treated 21,520 0.295 0.456 Leverage at two-digit
in year t and industry level, percent.
afterwards; = Indinvestment Pre-policy mean of 21,480 6.219 2.709
0 otherwise. CapInvest at two-digit
CSR A firm’s score of 21,431 25.037 16.663 industry level, percent.
corporate social
responsibility from the
Hexun website. estimation by including only the firm and year fixed effects in column
HXSE Level-1 sub-indicators 21,431 13.661 6.039 (1), and find that the ADP is positively related to CSR performance,
of CSR, Shareholder
implying that the policy significantly promotes the firm to engage in CSR
equity responsibility.
HXEM Level-1 sub-indicators 21,431 2.823 3.230 activities. We then augment the specification with a set of firm-level
of CSR, Employee controls in column (2). The estimated coefficient of the ADP is posi­
responsibility. tive and statistically significant at the 1% level. In column (3), we
HXSCC Level-1 sub-indicators 21,431 1.829 4.803 further add a battery of interaction terms between pre-policy industry-
of CSR, Supplier,
customer, and
level controls and linear time trends, which helps to reassure the validity
consumer rights of our identification strategy (Fan and Liu, 2020). In line with our
responsibility. theoretical prediction in Section 3, the estimated coefficient of the ADP
HXEN Level-1 sub-indicators 21,431 1.893 5.182 remains positive and statistically significant at the 1% level, indicating
of CSR, Environment
that the policy appears to have positive impacts on CSR performance.
responsibility.
HXSCV Level-1 sub-indicators 21,431 4.802 4.341 Hence, Hypothesis 1 is verified. Quantitatively, according to our
of CSR, Society preferred column (3), relative to their counterparts, the CSR score of
contribution value. treated firms increases by 1.8 after policy enactment, accounting for
RKSCSR A firm’s score of 5769 39.935 12.385 about 6% of the pre-policy mean of CSR score (29.74). In this way, our
corporate social
responsibility from the
study actually confirms Chang et al.’s (2020) finding that tax reductions
Rankins ranking system. would induce an increase in CSR performance and also supports the
Δ Cashholdings (The difference in the 20,956 27.383 236.988 literature revealing the negative relationship between tax expense and
cash and cash CSR practices to some extent (Xu and Zeng, 2016; Gandullia and Piserà,
equivalents between
2020).
two consecutive years)/
lagged capital stock, The estimated coefficients of firm-level controls are also basically
percent. consistent with the existing literature. Similar to Okafor et al. (2021)
Cashflow (Net after-tax profits + 20,988 58.095 139.365 and Zhou and Gan (2022), firm size (Size) and profitability (ROA) are
current year positively related to the CSR score, implying that companies with
depreciation)/lagged
capital stock, percent.
greater profitability and greater size are more likely to engage in CSR
Size Natural logarithm of the 21,519 8.363 1.367 activities. Firm leverage (Leverage) is negatively correlated with CSR
total assets. scores, indicating that a higher asset-debt ratio may lead to worse CSR
Leverage Total Liabilities/total 21,519 43.658 21.240 performance. In addition, the estimated coefficients of capital invest­
assets, percent.
ment (CapInvest), shareholding ratio of institutional investors (Institu­
CapInvest (Cash paid for the 21,472 5.012 4.817
purchase and tional), shareholding ratio of controlling shareholders
construction of fixed (Controllingholder), and the VAT reform dummy (VAT) are not statisti­
assets, intangible assets, cally significant.
and other long-term
assets in the current
year)/total assets, 5.2. Robustness checks
percent.
ROA Net after-tax profits/ 21,520 4.515 6.195
5.2.1. Alternative measures of CSR performance
total assets, percent.
ROE Net after-tax profits/ 21,399 7.861 12.000 As mentioned in Section 4.3, we are actually available the CSR score
owner’s equity, percent. from the Hexun and RKS systems, but we prefer the former because it
Institutional Shareholding ratio of 20,996 45.856 23.789 provides a larger sample. Considering that the CSR rating from the RKS
institutional investors, system is also used in some studies to measure CSR performance (e.g.
percent.
Controllingholder Shareholding ratio of 20,721 36.421 15.086
Kong et al., 2021), in this section, we then re-estimate the effects of the
controlling policies using the CSR rating provided by the RKS system as an indicator
shareholders, percent. of CSR performance. The estimated results are shown in columns (4)–(6)
VAT = 1 if a firm was 21,520 0.141 0.348 of Table 2. As shown, when replacing the dependent variable in Equa­
affected by the VAT
tion (2) with the CSR rating of the RKS system, the estimated coefficients
reform in year t and
afterwards; = of the ADP are also positive and statistically significant at the 5% level
0 otherwise. across the different regression specifications, which is consistent with
Industry-controls the baseline results. In other words, our baseline results remain robust to
Indsize Pre-policy mean of Size 21,480 26.415 1.450 another available measure of CSR performance.
at two-digit industry
level.
Indroa 21,480 4.461 2.426 5.2.2. Bacon decomposition
Considering that the treatment timing of each round of ADP is
different, we set up a staggered DID framework in the benchmark

6
L. Zhao and G. Peng Journal of Cleaner Production 385 (2023) 135647

Table 2
Policy effects on corporate social responsibility (CSR) performance.
(1) (2) (3) (4) (5) (6)

Baseline regression: CSR Robustness checks: RKSCSR

ADP 1.313*** 1.680*** 1.800*** 0.859** 0.931** 0.991**

(0.455) (0.424) (0.440) (0.437) (0.434) (0.458)
Size 4.472*** 4.404*** 1.652*** 1.639***
(0.287) (0.287) (0.531) (0.533)
Leverage − 0.055*** − 0.056*** − 0.031** − 0.031**
(0.011) (0.011) (0.016) (0.016)
ROA 0.805*** 0.812*** 0.004 0.002
(0.023) (0.023) (0.031) (0.030)
CapInvest 0.031 0.028 − 0.005 − 0.007
(0.027) (0.028) (0.037) (0.037)
Institutional − 0.005 − 0.004 − 0.008 − 0.008
(0.013) (0.013) (0.015) (0.016)
Controllingholder − 0.012 − 0.010 − 0.003 − 0.001
(0.017) (0.017) (0.022) (0.022)
VAT 0.165 − 0.371 0.585 0.489
(0.532) (0.557) (0.556) (0.578)
Industry-controls × T No No Yes No No Yes
Firm fixed effects Yes Yes Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes Yes Yes
N 21,431 20,634 20,596 5700 5591 5583
Adj.R2 0.48 0.56 0.56 0.82 0.82 0.82

Notes: *, **, and *** indicate significance at 10%, 5%, and 1% levels, respectively. Robust standard errors are in parentheses, and they are clustered at the firm level.

supports our baseline results.8 Meanwhile, the average DID estimate,

Table 3 which compares the later and earlier treatment cohorts, is positive, and
Bacon decomposition. its weight is only 9.6%, suggesting that our baseline regression results
are indeed reliable.
Balanced panel estimate Dependent variable: CSR

ADP 1.283*** 5.2.3. Panel event study

(0.470)
Our identification strategy’s validity is dependent on the assumption
N 20,650
that treated and controlled businesses exhibit comparable time trends.
Adj.R2 0.49
However, we cannot directly examine this assumption in reality, and we
Bacon decomposition. Weight Average DID estimate can test whether the CSR scores of the two groups follow a parallel trend
Later Group T vs. Earlier Group C 0.096 1.784 before policy enactment. If the two groups indeed have similar pre-
Earlier Group T vs. Later Group C 0.269 1.969
T vs. Never Treated 0.634 0.917
policy behaviors, we would like to believe that they have a common
trend without a policy shock. To test this, following Liu and Mao (2019),
Notes: T = Treatment; C = Control; the Bacon decomposition method re­ we replace the ADP dummy in Equation (2) with a set of event-time
quires balanced panel data; the balanced panel estimate in Table 3 is
dummies and then conduct a panel event-study analysis using the
offered according to Equation (2) without firm-level and industry-level
following specification:
controls. *, **, *** indicate significance at 10%, 5%, and 1% levels,
respectively. Robust standard errors are in the parentheses, and they are ∑
5
clustered at the firm level. yit = α + βk Dti0 +k + γXit + δZj • t + αi + λt + εit . (3)
k=− 9

In the equation, Dti0 +k is an event-time dummy; Dti0 +k = 1 if t − ti0 = k

analysis (see Equation (2)). Nevertheless, recent studies on the econo­
metric theory of the DID estimator claim that when treatments take
place at different time points, the traditional TWFE-DID estimator may
provide a biased estimate for the policy effects (De Chaisemartin and
D’Haultfoeuille, 2020; Goodman-Bacon, 2021). Goodman-Bacon (2021)
demonstrates that the TWFE-DID estimator is actually a weighted
average of all possible 2 × 2 DID estimators across the data, and the
estimation bias is sourced from the 2 × 2 DID estimator that views the
earlier treatment cohort as the control group for the later treatment
cohort. The reason is that, in that case, the earlier treatment cohort is not
a suitable control group because it has been affected by the policy shock.
Of course, if the weight of this type of estimator is relatively small, then
the TWFE-DID estimator is still reliable. In this subsection, following Xu
(2021), we employ the Bacon decomposition method proposed by
Goodman-Bacon (2021) to check the reliability of our DID estimator.
The results are shown in Table 3. Before the decomposition process, a
balanced panel dataset is extracted from the entire sample because the
bacon decomposition method is based on balanced panel data. As
shown, with balanced panel data, the estimated coefficient of ADP re­
mains positive and statistically significant at the 1% level, which again
(k = − 9, -8, …,4,5), where ti0 represents the year in which firm i began
to be treated by the policy, and 0 otherwise. The definitions of the
remaining variables are the same as those in Equation (2). When k < 0,
the estimated coefficient of Dti0 +k (i.e. βk ) captures the pre-policy trends
between the treated and the control firms. When k ≥ 0, βk reflects the
evolution of the policy effects. We remove the term k = − 1, meaning
that we employ the year preceding the year in which the firms began to
be treated as the baseline year (i.e. β− 1 = 0).
Fig. 1 plots all point estimates of βk and their 95% confidence in­
tervals from Equation (3). As shown, all estimated coefficients of the
event-time dummies before policy enactment (i.e.βk<0 ) are not signifi­
cant in statistics at the 5% level, implying that the CSR performance in
the two groups indeed follow a similar trend, which much increases our
confidence in the validity of our identification strategy. Meanwhile,
consistent with our baseline results, almost all coefficients of the time
dummies after policy enactment (i.e.βk≥0 ) are positive and statistically
8
Required by the bacon decomposition method, the coefficient of ADP here is
estimated by Equation (2) without firm-level and industry-level controls.

7
L. Zhao and G. Peng Journal of Cleaner Production 385 (2023) 135647

Fig. 1. Event study estimations: the policy effects on CSR performance.

Notes: This figure plots the point estimates of βk and their 95% confidence
intervals from Equation (3). We use the year preceding the year in which the
firms began to be affected (i.e. k = − 1) as the baseline year, that is, β− 1 = 0.
significant at the 5% level, indicating a positive policy effect on CSR
performance. Given that the panel event study is one of the solutions for
potential estimate bias in the TWFE-DID framework (Xu, 2021), Fig. 1
provides additional support for the dependability of our findings.
Fig. 2. Distribution of point estimates in 1000 falsification tests.
Notes: This figure graphs the distribution of point estimates and their P-values
in 1000 falsification tests. We conduct 1000 falsification tests by randomly
assigning the treatment status or the policy year to firms and estimate the false
policy effects using Equation (2). The red horizontal line represents the 5%
significance level. The black vertical dashed line denotes the baseline estimate
(see Column 3 of Table 2).

5.2.4. Placebo tests

Table 4
To confirm that the policy is the primary driver of the baseline
Placebo tests: Tax position, fixed-asset structure, and CSR preferences.
outcomes and rule out the possibility that our baseline results are the
result of random chance, we conduct a set of falsification tests in this Panel A. Tax position and fixed-asset structure.
section. First, we randomly assign the treatment status or policy year to Tax position Fixed-asset structure
the firms. As described in Section 2, the start dates of the three rounds of (1) (2) (3) (4) (5)
ADP in China are denoted as {2014, 2015, and 2019}. According to
ADP Negative Positive Short Medium Long
Section 4.1, the number of treated firms corresponding to each round of
− 0.637 1.994*** 1.143 1.543** 1.777**
the policy can also be represented as {495, 607, and 350}. The practices (1.226) (0.470) (0.804) (0.696) (0.809)
of the placebo test are as follows: (1) We randomly draw three different N 2301 18,295 5862 8277 6145
years from 2011 to 2018,9 denoted as {t1 , t2 , and t3 }, and then set these Adj.R2 0.50 0.55 0.55 0.57 0.56
years as the start dates of the false policy. (2) For the year t1 , 495 firms Panel B. CSR preferences.
are randomly selected and divided into treatment groups. For year t2 , the CEO age Number of analysts
other 607 firms are also randomly chosen and labeled as firms treated
(6) (7) (8) (9)
since t2 . Then, 350 firms are selected from the remaining untreated firms
and denoted as firms treated at t3 . After the above random process, we ADP Young Near-retirement More analysts Fewer analysts
1.846*** 0.764 2.180*** 0.159
can construct a dummy for the false policy namely “false ADP” and then
(0.459) (1.427) (0.841) (0.738)
estimate the false policy effects by replacing the ADP in Equation (2) N 19,067 1479 6279 6326
with the false ADP. Given that the treatment status is generated at Adj.R2 0.56 0.61 0.55 0.53
random, the effects of the false ADP on CSR should be close to zero and
Notes: All columns control for a set of firm-level controls, a battery of interac­
not statistically significant. To improve the reliability of the test, we
tion terms between pre-policy industry-level controls and linear time trends, and
repeat the above random process 1000 times and depict the distribution firm- and year-fixed effects (see Table 2). *, **, *** indicate significance at 10%,
of these point estimates in Fig. 2. As shown, all point estimates follow a 5% and 1% levels, respectively. Robust standard errors are in the parentheses,
zero-mean distribution and their P values are almost larger than 5%, and they are clustered at the firm level.
implying that the false policy has no apparent impact on CSR perfor­
mance. Simultaneously, the baseline estimate (see Column 3 of Table 2)
is situated outside the distribution. All the above results suggest that our group for profitable firms. To test this, we identify a firm’s tax status
baseline results are indeed driven by the actual policy. based on its pre-policy (2010–2013) mean of operating profits and
Second, we explore the impact of the tax position on policy effects. divide the full sample into two sub-samples. We then estimate the policy
Compared to enterprises with a negative tax status, firms with a positive effects using Equation (2) and the subsamples. The corresponding results
tax position are eligible for an instant bonus since ADP can reduce tax are shown in Columns 1–2 of Table 4. In line with Zhao and Fang (2022),
payment cash outflows. Thus, if the baseline results are indeed driven by across the positive tax position subsample, the coefficient of the ADP
ADP, the policy effects on firms with a positive tax status should be dummy is positive and statistically significant at the 1% level, whereas
stronger than those on the firms with negative tax positions. In other that in the negative tax position subsample is not significant in statistics.
words, firms with negative tax positions can be viewed as a placebo Third, based on the nature of ADP, firms investing in longer-life fixed
assets would obtain more bonuses because ADP accelerates deductions
from the further future. Hence, we predict that policy effects on firms
9
investing in longer-life assets would be more pronounced. That is, we
The DID model required at least one pre-policy year and one post-policy
can regard firms investing in shorter-lived fixed assets as a placebo
year in the sample, so we do not choose 2010 and 2019 because they are the
group in comparison with their counterparts. To verify this, we first
first and the last period in our sample.

8
L. Zhao and G. Peng Journal of Cleaner Production 385 (2023) 135647

Table 5 analysts may have stronger CSR preferences. Hence, we split our sample
Alternative trends and cluster levels. into deciles based on the pre-policy mean of the number of analysts
Dependent (1) (2) (3) (4) (5) corresponding to each firm and then compare the bottom and top three
variable: CSR deciles. The bottom three deciles sample is labeled as “Fewer analysts”,
ADP 1.820*** 1.806*** 1.727*** 1.800*** 1.800*** while the top three deciles sample is denoted as “More analysts”. Using
(0.441) (0.445) (0.449) (0.610) (0.380) Equation (2), we estimate the policy effects in the two subsamples in
Firm-level controls Yes Yes Yes Yes Yes turn. In line with our expectations, the results in columns 8–9 of Table 4
Industry-controls Yes Yes Yes Yes Yes indicate that the policy effects are more pronounced across firms fol­
× T
Industry-controls Yes Yes Yes No No
lowed by more analysts.
× T2
Industry-controls No Yes Yes No No 5.2.5. Alternative trends and clustering levels
× T3 In the baseline regression model, we add a set of interaction terms
Province-year No No Yes No No
between pre-policy industry-level controls and linear time trends to
fixed effects
Firm fixed effects Yes Yes Yes Yes Yes control for linear time trends that vary across industries. In this section,
Year fixed effects Yes Yes Yes Yes Yes we include additional time trends and fixed effects in Equation (2) to
Cluster level Firm Firm Firm Industry Province control for more flexible divergences at the industry and province levels.
N 20,596 20,596 20,596 20,596 20,596 The corresponding results are shown in the first three columns of
Adj.R2 0.56 0.56 0.57 0.56 0.56
Table 5. Specifically, we augment the specification with interaction
Notes: *, **, and *** indicate significance at the 10%, 5%, and 1% levels, terms between pre-policy industry-level controls and quadratic time
respectively. Robust standard errors are in parentheses. trends in column (1). We further add a series of interaction terms be­
tween pre-policy industry-level controls and cubic time trends in column
compute the pre-policy mean of the long-life fixed asset ratio10 and (2). Column (3) further includes the province-year fixed effects. In
divide our sample into deciles. The bottom three deciles sample is addition, Columns 4–5 of Table 5 provide the estimated results using the
labeled as “Short” firms, the top three deciles sample is denoted as baseline specification (i.e. Equation (2)) with standard errors clustered
“Long” firms, and the rest are the “Medium” firms. The estimated results at the industry and province levels, respectively. As we can see, in line
from Equation (2) and these three subsamples are presented in columns with the baseline regression, the coefficients of the ADP are positive and
3–5 of Table 4. As shown, consistent with Zhao and Fang (2022), the statistically significant at the 1% level across all these alternative
values of the estimated coefficients of the ADP dummy increase with the specifications.
long-life asset ratio, and the policy effects are only significant for “Me­
dium” firms and “Long” firms.
5.3. Interpretation
Fourth, we further validate our baseline results by exploring the
impact of CSR preferences on the policy effects. Intuitively, firms with
Thus far, we know the average effects of ADP on CSR performance. In
stronger CSR preferences are more likely to convert policy bonuses into
this section, we first examine the policy effects of ADP on the Level-1
CSR investments. Hence, after policy enactment, we should observe that
sub-indicators of CSR, further helping us understand which di­
the CSR performance of firms with stronger CSR preferences experiences
mensions of CSR are mainly affected by ADP. Then we explore the
a more pronounced increase. In this case, firms with weaker CSR pref­
mechanisms underlying the positive link between ADP and CSR per­
erences may act as a placebo group relative to the firms with stronger
formance, and also provide evidence for why firms engage in CSR
CSR preferences. To test this prediction, we employ two criteria to
activities.
measure firms’ CSR preferences. As mentioned in Section 3, CSR can be
regarded as a special form of long-term investment; thus, firms whose
5.3.1. Policy effects on separate dimensions of CSR
CEOs have long-term horizons are more likely of stronger CSR prefer­
As described in Section 4.3, the total CSR score consists of five Level-
ences (Chang et al., 2020). Intuitively, relative to young CEOs, CEOs
1 sub-indicators, namely HXSE, HXEM, HXSCC, HXEN, and HXSCV.
who approach retirement often have shorter horizons (Gao, 2010; Jenter
Table 6 shows the policy effects on these sub-indicators. As we can see,
and Lewellen, 2015). In this way, compared with firms with
only when the dependent variable in Equation (2) is replaced with
near-retirement CEOs, firms managed by young CEOs are more likely to
HXEM, HXSCC, and HXEN, the estimated coefficients of the ADP dummy
invest in CSR. To verify this, we calculate the pre-policy mean of the
are positive and statistically significant at the 1% level. This result
CEO’s age and divide firms whose CEOs’ mean age is less (more) than 57
suggests that the positive effects of ADP on CSR performance mainly
into the young (near-retirement) CEO group.11 Columns 6–7 of Table 4
concentrate on employee responsibility, supplier, customer, consumer
show the results estimated using Equation (2). Consistent with our ex­
pectations, the policy effects on CSR performance are significant only for
firms managed by young CEOs. Furthermore, analysts are an important Table 6
The policy effects on Level-1 sub-indicators of CSR.
medium for information dissemination in the capital market, playing the
role of external monitors (Hu et al., 2021). They would provide firms Dependent Variable (1) (2) (3) (4) (5)
with social pressure to prevent them from engaging in irresponsible HXSE HXEM HXSCC HXEN HXSCV
activities (Jo and Harjoto, 2014). Thus, firms that are followed by more ADP − 0.150 0.449*** 0.621*** 0.788*** 0.030
(0.098) (0.092) (0.139) (0.169) (0.095)
Firm-level controls Yes Yes Yes Yes Yes
Industry-controls × T Yes Yes Yes Yes Yes
10
As mentioned in Section 2, Article 60 of IRL classifies a firm’s fixed assets Firm fixed effects Yes Yes Yes Yes Yes
into five categories and stipulates their standard depreciation periods are 20 Year fixed effects Yes Yes Yes Yes Yes
N 20,596 20,596 20,596 20,596 20,596
years, 10 years, 5 years, 4 years, and 3 years. The long-life assets here are the
Adj.R2 0.79 0.51 0.43 0.43 0.50
fixed assets with their standard depreciation periods being 20 years or 10 years.
11
Referring to Gao (2010), we denote the CEOs whose age is more than three Notes: All columns control for a set of firm-level controls, a battery of interac­
years younger than the statutory retirement age (i.e. 60 years old) as the young tion terms between pre-policy industry-level controls and linear time trends, and
CEOs. Given that the statutory retirement age of female is 55 years old, we firm- and year-fixed effects (see Table 2). *, **, *** indicate significance at the
multiply the age of the female CEOs by 1.1 (i.e.60 55) before calculating the 10%, 5% and 1% levels, respectively. Robust standard errors are in the paren­
pre-policy mean. theses, and they are clustered at the firm level.

9
L. Zhao and G. Peng
rights responsibility, and environment responsibility, meaning that ADP
contributes to increasing employee benefits, improving product quality
and customer and supplier satisfaction, and improving environmental
quality.
5.3.2. Mechanism analysis
As mentioned in Section 3, corporate decisions on CSR activities
highly depend on internal funds. Meanwhile, ADP not only provides
additional cash flows for firms and eases corporate financing and cash
flow constraints, but also enhances corporate profitability, both of
which increase firms’ internal funds. Hence, we hypothesize that
reducing financial constraints (cash flow effect) and improving profit­
ability (firm performance effect) are the possible channels through
which ADP affects CSR performance. Next, we explore these two
mechanisms in turn.
First, based on Almeida et al. (2004), we examine the impact of ADP
on financial constraints with the following cash-cash flow sensitivity
specification.
ΔCashholdingsit = α + β1 Cashflowit + β2 ADPit + β3 ADPit × Cashflowit
+ γXit + δZj • t + αi + λt + εit ,
(4)
where Cashholdingsit is the ratio of cash and cash equivalents to lagged
capital stock and Cashflowit is the ratio of cash flows to lagged capital
stock. The definitions of the remaining variables are the same as those in
Equation (2). If β3 is negative and statistically significant, we would like
to believe that the ADP significantly reduces the cash-cash flow sensi­
tivity and thus eases the firms’ financial constraints. The corresponding
results are shown in columns 1–2 of Table 7. Column (1) does not
include firm-level controls (i.e. Xit ) and interaction terms between pre-
policy industry-level controls and linear time trends (i.e. Zj • t). As
shown, the estimated coefficients of the interaction terms between the
ADP dummy and cash flows are negative and statistically significant at
the 1% level, suggesting that ADP indeed reduces firms’ financial
constraints.
To shed more insight into the mechanism, we examine the hetero­
geneous policy effects of financial constraints on CSR performance. In
practice, we employ the pre-policy mean of cash flow ratio (Fan and Liu,
2020) and size-age (SA) index12 (Hadlock and Pierce, 2010) as sorting
variables to divide our sample into deciles and then compare the bottom
and top three deciles. According to Zwick and Mahon (2017) and Ohrn
(2019), if financial constraints are indeed one of the channels, we should
observe that policy effects are more apparent for firms with stronger
financial constraints (i.e., poor cash flow or a high SA index). As pre­
sented in columns 3–6 of Table 7, although the coefficients of the ADP
dummy in all sub-samples are positive, only those in firms with poor
cash flows or with a high SA index are significant in statistics, which is in
accordance with our expectations.
Taken together, easing financial constraints is indeed the channel
through which ADP affects CSR performance, confirming the financial
constraint theory which interprets the relationship between tax expense
and CSR performance. The financial constraint theory claims that tax
expense imposes financial constraints on enterprises, impeding enter­
prises to engage in CSR activities, and thus a reduction in tax expense
would ease financial constraints and improve CSR performance
(Huseynov and Klamm, 2012; Sun and Gunia, 2018; Kong et al., 2021).
Second, we replace the dependent variable of Equation (2) with the
measures of firm performance to test the other mechanism (i.e. firm
performance effect). Referring to Boso et al. (2017), we employ return
on assets (ROA) and return on equity (ROE) to denote firm performance.
As presented in columns 1–2 of Table 8, the estimated coefficients of
12
It is calculated from (− 0.737 × Size)+(0.043× Size2)− (0.040 × Age),
where Size represents the log of firm assets, and Age is the firm age.
10
Journal of Cleaner Production 385 (2023) 135647
ADP are 0.382 and 0.951 respectively, and statistically significant at the
1% level, suggesting that the policy has a positive impact on firm per­
formance. These results are in line with Lin and Liu (2022) and Yu et al.
(2022) who investigate the effects of China’s ADP on firm performance.
For instance, Lin and Liu (2022) also explore the impacts of ADP on ROA
and ROE and document that the estimated coefficients of ADP are 0.321
and 1.050 respectively, quite similar to our estimations.
Furthermore, if firm performance is also one of the mechanisms
behind the positive link between ADP and CSR performance, we should
observe that, relative to their counterparts, ADP would have more
pronounced effects on firms with worse pre-policy performance. To test,
we use the pre-policy mean of ROA and ROE as sorting variables to
divide our sample into deciles and then compare the bottom and top
three deciles. The estimated results of the split sample are shown in
columns 3–6 of Table 8. Consistent with our expectations, the positive
policy effects on CSR performance are mainly significant for firms with
low ROA or low ROE, which much increases our confidence in the view
that firm performance is one of the channels by which ADP affects CSR
performance.
5.3.3. Further analyses
We have documented that ADP can improve CSR performance by
cash flow effect and firm performance effect. Now we turn to answer
why firms would like to engage in CSR activities when they obtain policy
bonuses. As analyzed in Section 3.3, we posit that firm competitiveness
is the common explanation, and thus relative to their counterparts, the
positive effects of ADP on CSR performance are mainly significant in
firms facing stronger market competition (Hypothesis 2). To test this
hypothesis, we follow Cai and Liu (2009) to use three variables to
measure the intensity of market competition: (1) the
Herfindahl-Hirschman index (HHI) based on operating revenue at the
two-digit industry level; (2) the concentration ratio (CR4), defined as the
revenue share of the four largest firms in each industry; and (3)
industry-average profit margins (Margins), measured by the ratio of net
after-tax profits to total assets at the two-digit industry level. All of these
variables are negatively related to competition. In practice, we exploit
the pre-policy mean of the three variables to divide our sample into
deciles. The bottom three deciles are labeled as firms facing more
intense competition, while the top three are denoted as firms facing less
competition. Panel A of Table 9 shows the results estimated from
Equation (2) and the subsamples. Consistent with our expectations, the
policy effects on CSR performance are indeed more pronounced across
firms with a lower HHI, firms with a lower concentration ratio (CR4),
and firms with lower profit margins, that is, firms facing more market
competition,13 which implies that Hypothesis 2 is verified and also
supports the studies viewing CSR engagement as the competitive strat­
egy (Gandullia and Piserà, 2020; Chang et al., 2020; Hsu et al., 2022).
We have already confirmed that for firms, transforming the policy
bonus into CSR performance is a competitive strategy and thus a long-
term orientated decision. This section provides additional evidence for
the above claims by exploring the impact of corporate governance on
policy effects. The rationale here is that if the policy effects on CSR
performance are mainly significant for firms with poor corporate
governance, we would have reasons to believe that CSR investment may
be only a window-dressing action or a waste of economic resources
13
Although the estimated coefficients of ADP dummy in columns 1–2 are
positive and statistically significant at least at 5% level, the value of coefficients
across firms with a lower Herfindahl index is larger than that in firms with a
higher Herfindahl-Hirschman index. Meanwhile, following to Cleary (1999), we
also leverage a bootstrapping method to calculate the empirical p-value for
determining the significance of the difference between the two columns. By
resampling 200 times, the p-value is 0.075, implying that the difference be­
tween the value of coefficients in columns 1 and 2 are significant in statistics at
the 10% level.
L. Zhao and G. Peng Journal of Cleaner Production 385 (2023) 135647

Table 7
Mechanisms: Financial constraints.
Dependent variable: Δ Cashholdings CSR

(1) (2) (3) (4) (5) (6)

All sample All sample Poor cash flow Strong cash flow High SA index Low SA index

ADP − 7.523 − 9.568* 2.310*** 0.162 4.385*** 0.536

(5.709) (5.608) (0.730) (0.817) (0.784) (0.844)
Cashflow 0.653*** 0.602***
(0.062) (0.067)
ADP × Cashflow − 0.362*** − 0.350***
(0.109) (0.116)
Firm-level controls No Yes Yes Yes Yes Yes
Industry-controls × T No Yes Yes Yes Yes Yes
Firm fixed effects Yes Yes Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes Yes Yes
N 20,941 20,538 6188 6062 5981 6236
Adj.R2 0.07 0.08 0.56 0.56 0.59 0.56

Notes: *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively. Robust standard errors are in the parentheses, and they are clustered at the firm
level.

Table 8
Mechanisms: Firm performance.
Dependent variable: ROA ROE CSR

(1) (2) (3) (4) (5) (6)

All sample All sample Low ROA High ROA Low ROE High ROE

ADP 0.382*** 0.951*** 1.780** 0.182 1.921** 0.947

(0.148) (0.303) (0.802) (0.769) (0.781) (0.926)
Firm-level controls Yes Yes Yes Yes Yes Yes
Industry-controls × T Yes Yes Yes Yes Yes Yes
Firm fixed effects Yes Yes Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes Yes Yes
N 20,604 20,508 6061 5680 6019 5567
Adj.R2 0.44 0.31 0.46 0.54 0.42 0.53

Notes: *, **, *** indicate significance at the 10%, 5% and 1% levels, respectively. Robust standard errors are in the parentheses, and they are clustered at the firm level.

Table 9
Heterogeneous policy effects by market competition and corporate governance.
Panel A. Market competition.

Dependent Variable = CSR (1) (2) (3) (4) (5) (6)

low HHI high HHI low CR4 high CR4 low Margins high Margins

ADP 2.986*** 2.322** 1.736*** 1.127 2.392** 1.128

(0.650) (0.933) (0.623) (0.853) (1.156) (0.781)
N 6268 5897 6497 6034 6307 6249
Adj.R2 0.58 0.56 0.58 0.55 0.56 0.57

Panel B. Corporate governance.

Dependent Variable = CSR (7) (8) (9) (10) (11) (12)

High board indep Low board indep Non-duality Duality Strong equity balance Poor equity balance

ADP 1.961** 1.125 1.792*** 0.997 2.440*** 0.515

(0.824) (0.771) (0.580) (0.642) (0.759) (0.870)
N 6331 6352 13,730 6866 6154 6337
Adj.R2 0.56 0.56 0.56 0.56 0.57 0.56

Notes: All columns control for a set of firm-level controls, a battery of interaction terms between pre-policy industry-level controls and linear time trends, and firm- and
year-fixed effects (see Table 2). *, **, *** indicate significance at the 10%, 5% and 1% levels, respectively. Robust standard errors are in the parentheses, and they are
clustered at the firm level.

(Chang et al., 2020). In other words, if engagement in CSR indeed acts as
a prudent competitive strategy that contributes to improving firms’
competitiveness, we should observe that ADP has more apparent im­
pacts on the CSR of firms with better governance.
Following Neville et al. (2019), Lagasio and Cucari (2019), and Nour
et al. (2020), we employ three variables to measure the quality of
corporate governance: (1) board independence, defined as the ratio of
the number of independent directors to that of all directors; (2) CEO
duality; and (3) equity balance, defined as the shareholding ratio of the
2–5 largest shareholders divided by the shareholding ratio of the largest
shareholder. Improving board independence is a common method for
reducing improper decision-making in enterprises (Neville et al., 2019).
Poor equity balance leads to the encroachment of interests among
shareholders, which has a significant negative impact on corporate
governance. Thus, both board independence and equity balance are
positively correlated with corporate governance. As we proceed to
detail, we use the pre-policy mean of these two variables to partition the
full sample into deciles and then compare the policy effects between the

11
L. Zhao and G. Peng
bottom three and top three deciles. CEO duality is actually a variant of
board independence and has a negative relationship with the quality of
corporate governance (Neville et al., 2019; Nour et al., 2020). Panel B of
Table 9 presents the estimated results based on the subsamples. As
shown, the positive effects of ADP on CSR performance are more pro­
nounced for firms with higher board independence, firms with
non-duality, and firms with stronger equity balance, that is, firms with
better corporate governance, which much increases our confidence in
our claim that investment in CSR is a decision with long-term horizons.
6. Conclusions and policy implications
Accelerated depreciation policies (ADP) are used worldwide to pro­
mote business investments and stimulate the economy. Although there
are growing studies on the effects of ADP on firms, none has extended
the research to the area of sustainability. We aim to fill the gap by
exploring the policy effects on CSR performance. With a staggered
difference-in-differences (DID) framework and the data of China’s A-
share listed companies from 2010 to 2019, we find that compared with
the firms in the control group, ADP apparently improves the CSR per­
formance of treated firms, which supports Chang et al.’s (2020) finding
that firms would engage in CSR activities more actively in response to
tax reductions. Besides, as the positive link between ADP, the important
tax incentives aiming to reduce business cost, and CSR performance is
identified, this study further confirms the literature documenting the
negative relationship between tax expense and CSR activities (Xu and
Zeng, 2016; Gandullia and Piserà, 2020) and challenges the Lu and
Zhu’s (2021) point that a decrease in effective tax rate may not promote
firms to engage in CSR activities to some extent. Consistent with Zhao
and Fang (2022), we also find that the policy effects of ADP are mainly
significant for firms with positive tax positions, firms investing in
longer-life fixed assets, and firms with higher CSR preferences, which
further validates our baseline results. In addition, we find that the rise in
total CSR score is primarily attributable to the rise in three Level-1
sub-indicators including (1) employee responsibility, (2) supplier,
customer, and consumer rights responsibility, and (3) and environment
responsibility. To examine the mechanisms underlying the positive link
between ADP and CSR performance, we find that ADP contributes to
easing financial constraints and improving firm performance. Related to
the policy effects on financial constraints, our study can be regarded as
the empirical evidence for the financial constraint theory which in­
terprets the relationship between tax expense and CSR performance and
claims that tax expense has negative impacts on CSR performance by
imposing corporate financial constraints on enterprises (Huseynov and
Klamm, 2012; Sun and Gunia, 2018; Kong et al., 2021). Finally, we
provide evidence that the positive effects of ADP are more pronounced
for firms facing more market competition and firms with better corpo­
rate governance, shedding more light on the mechanisms.
To the best of our knowledge, this study is among the first to explore
the causal link between ADP and CSR performance, thus contributing to
the literature in several aspects. First, this study adds to the literature on
the determinants of CSR performance. Previous studies have identified
many factors that may affect the decisions of CSR activities. However, no
research has carefully investigated the impacts of tax incentives on CSR
performance. This study fills the gap by examining the causal link be­
tween accelerated depreciation and CSR performance. Second, our study
also contributes to the growing literature that investigates the effects of
ADP by carefully examining the impacts of ADP on an unexplored but
important outcome: CSR performance. Prior studies have documented
the effects of ADP on company investment (Maffini et al., 2019; Ohrn,
2019; Fan and Liu, 2020; Cui et al., 2022), labor market outcomes
(Garrett et al., 2020; Zhao and Fang, 2022), corporate leverage (Pan­
teghini and Vergalli, 2016; Du et al., 2022), and firm performance (Lin
and Liu, 2022; Yu et al., 2022). Nobody has expanded the research into
the sustainability topic. Our study supplements the literature by pre­
senting the impacts of ADP on CSR performance. Third, our study
12
Journal of Cleaner Production 385 (2023) 135647
touches on the burgeoning literature that discusses the impact factor of
tax policy effectiveness. Fan and Liu (2020) find that tax compliance is a
significant determinant of tax policy effectiveness. Fang et al. (2022)
show that the intensity of tax collection and the degree of product (and
factor) market development also affect the effectiveness of tax policy.
Our study highlights the significance of enhancing marketization to
make tax policies effective.
Moreover, our study is highly relevant for policymakers concerned
with sustainable development and social welfare, since it helps to clarify
whether and how tax policy influences the CSR decisions of businesses.
First, our findings suggest that ADP can serve as an important tool for
promoting enterprises to engage in CSR activities, hence acting as a
significant means to attain sustainable development and create spillover
effects from corporate to social welfare. Second, ADP may be an effective
means to help companies get out of business difficulties. As a result of
the COVID-19 pandemic, numerous businesses have fallen into financial
difficulties and are under immense pressure to survive. Our findings
indicate that ADP would provide enterprises with immediate cash flows
and thus ease financial constraints, while simultaneously enhancing
their performance. These results suggest that during the COVID-19
pandemic, ADP may play a key role in assisting businesses to survive
the storm. Third, related to the heterogeneous policy effects varying by
market competition, our findings highlight the significance of improving
marketization in assuring the effectiveness of tax policy and fostering
sustainable development.
Nevertheless, this study is still subject to several limitations. First, we
have to admit that our findings are the result of a policy experiment in
the Chinese context, and thus there would raise a concern that our
findings may not be directly generalized to other contexts. But what
makes us slightly relieved is that the existing literature has shown that
ADP in different contexts could lead to similar economic consequences.
For example, Zwick and Mahon (2017) disclose the investment effects of
bonus depreciation in the U.S., Maffini et al. (2019) also document the
positive effects of UK first-year capital allowances on the firm invest­
ment, and then Fan and Liu (2020) reconfirm Zwick and Mahon’s (2017)
and Maffini et al.’s (2019) findings in the context of China. Hence, our
findings on CSR performance may be relevant for other economies as
well. Of course, to obtain more direct and clear evidence, future studies
can use policy experiments and data from other countries to re-examine
our results. Second, due to data availability, we conduct our empirical
analysis based on the dataset of all China’s listed companies, but a se­
lection bias could still exist. The reason is that sample of listed com­
panies does not include SMEs, while SMEs are also an important part of
all China’s companies. Therefore, future research could explore our
questions again by cooperating with the government to obtain some
unique administrative datasets that cover SMEs. Third, relative to the
worldwide used Kinder, Lydenberg, Domini (KLD) database, the Hexun
CSR scoring system that we use to measure CSR performance is under
improvement (Lu and Zhu, 2021), which may undermine the credibility
of our conclusions. Thus, improving the precision of China’s CSR mea­
surements ought to be an important focus of future research.
CRediT authorship contribution statement
Lexin Zhao: Software, Methodology, Writing – original draft. Gang
Peng: Supervision, Writing – review & editing.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data will be made available on request.
L. Zhao and G. Peng
Acknowledgements
The research was funded by the General Program of National Natural
Science Foundation of China (grant No. 72274018) and the Project of
Real Estate Investment Research Center of Zhejiang University in 2022
(grant No. EI22007). The authors are grateful to the editors, anonymous
referees, the sponsor of the 41st Camphor Economics Seminar (Beijing),
and Xueying Bian from Beijing University of Posts and Telecommuni­
cations for their very helpful comments and suggestions. All remaining
errors are our own.
References
Almeida, H., Campello, M., Weisbach, M.S., 2004. The cash flow sensitivity of cash.
J. Finance 59 (4), 1777–1804.
Bannier, C.E., Bofinger, Y., Rock, B., 2022. Corporate social responsibility and credit risk.
Finance Res. Lett. 44, 102052.
Boso, N., Danso, A., Leonidou, C., Uddin, M., Adeola, O., Hultman, M., 2017. Does
financial resource slack drive sustainability expenditure in developing economy
small and medium-sized enterprises? J. Bus. Res. 80, 247–256.
Brammer, S., Millington, A., 2008. Does it pay to be different? An analysis of the
relationship between corporate social and financial performance. Strat. Manag. J. 29
(12), 1325–1343.
Cai, H., Liu, Q., 2009. Competition and corporate tax avoidance: evidence from Chinese
industrial firms. Econ. J. 119 (53), 764–795.
Cao, Y., Chen, W., 2017. The effects of the policy for accelerated depreciation of the fixed
assets: Evidence from China [2014] 75 of financial and taxation policy. J. Central
Univ. Finance Econ. vol. 11, 58–74 (in Chinese).
Chang, X., Jin, Y., Yang, E., Zhang, W., 2020. Corporate Taxes and Corporate Social
Responsibility. Nanyang Business School Research. Paper No. 20-18.
Cheng, B., Ioannou, I., Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strat. Manag. J. 35 (1), 1–23.
Cheng, X., Helen Wang, H., Wang, X., 2022. Common institutional ownership and
corporate social responsibility. J. Bank. Finance 136, 106218.
Cleary, S., 1999. The relationship between firm investment and financial status.
J. Finance 54 (2), 673–692.
Cui, W., Hicks, J., Xing, J., 2022. Cash on the table? Imperfect take-up of tax incentives
and firm investment behavior. J. Publ. Econ. 208, 104632.
De Chaisemartin, C., D’Haultfoeuille, X., 2020. Two-way fixed effects estimators with
heterogeneous treatment effects. Am. Econ. Rev. 110 (9), 2964–2996.
Derlukiewicz, N., Mempel-Śnieżyk, A., Mankowska, D., Dyjakon, A., Minta, S.,
Pilawka, T., 2020. How do clusters foster sustainable development? An analysis of
EU policies. Sustainability 12 (4), 1297.
Di Giuli, A., Kostovetsky, L., 2014. Are red or blue companies more likely to go green?
Politics and corporate social responsibility. J. Financ. Econ. 111 (1), 158–180.
Du, J., Shen, G., Zou, J., 2022. Tax incentives and firm financing structures: evidence
from China’s accelerated depreciation policy. Int. Tax Publ. Finance, forthcoming.
Dyck, A., Lins, K.V., Roth, L., Wagner, H.F., 2019. Do institutional investors drive
corporate social responsibility? International evidence. J. Financ. Econ. 131 (3),
693–714.
Eklington, J., 1998. Cannibals with Forks: the Triple Bottom Line of the 21St Century.
New Society Publishers, Stoney Creek, CT.
European Commission, 2001. Green paper-promoting a european framework for
corporate social responsibility. Comm. Eur. Communities.
Fan, Z., Liu, Y., 2020. Tax compliance and investment incentives: firm responses to
accelerated depreciation in China. J. Econ. Behav. Organ. 176, 1–17.
Fang, H., Wu, X., Shen, J.H., Zhao, L., 2022. The impact of technology identification
policy on firm innovation: Evidence from China. China Econ. Rev. vol. 76.
Flammer, C., 2015. Does product market competition foster corporate social
responsibility? Evidence from trade liberalization. Strat. Manag. J. 36 (10),
1469–1485.
Gandullia, L., Piserà, S., 2020. Do income taxes affect corporate social responsibility?
Evidence from European-listed companies. Corp. Soc. Responsib. Environ. 27 (2),
1017–1027.
Gao, H., 2010. Market misvaluation, managerial horizon, and acquisitions. Financ.
Manag. 39 (2), 833–850.
Garrett, D.G., Ohrn, E., Suárez Serrato, J.C., 2020. Tax policy and local labor market
behavior. Am. Econ. Rev.: Insights 2 (1), 83–100.
Goodman-Bacon, A., 2021. Difference-in-differences with variation in treatment timing.
J. Econom. 225 (2), 254–277.
Hadlock, C.J., Pierce, J.R., 2010. New evidence on measuring financial constraints:
moving beyond the KZ index. Rev. Financ. Stud. 23 (5), 1909–1940.
Hall, B.H., 2002. The financing of research and development. Oxf. Rev. Econ. Pol. 18 (1),
35–51.
Hao, J., He, F., 2022. Corporate social responsibility (CSR) performance and green
innovation: evidence from China. Finance Res. Lett. 48, 102889.
13
Journal of Cleaner Production 385 (2023) 135647
House, C.L., Shapiro, M.D., 2008. Temporary investment tax incentives: theory with
evidence from bonus depreciation. Am. Econ. Rev. 98 (3), 737–768.
Hsu, B., Chen, Y., Chen, L.L., 2022. Corporate social responsibility and value added in the
supply chain: model and mechanism. Technol. Forecast. Soc. Change 174, 121302.
Hu, M., Xiong, W., Xu, C., 2021. Analyst coverage, corporate social responsibility, and
firm value: evidence from China. Global Finance J. 50, 100671.
Huseynov, F., Klamm, B.K., 2012. Tax avoidance, tax management and corporate social
responsibility. J. Corp. Finance 18 (4), 804–827.
Jamali, D., 2006. Insights into triple bottom line integration from a learning organization
perspective. Bus. Process Manag. J. 12 (6), 809–821.
Jenter, D., Lewellen, K., 2015. CEO preferences and acquisitions. J. Finance 70 (6),
2813–2852.
Jo, H., Harjoto, M., 2014. Analyst coverage, corporate social responsibility, and firm risk.
Bus. Ethics Eur. Rev. 23 (3), 272–292.
Kacem, H., Brahim Omri, M.A., 2022. Corporate social responsibility (CSR) and tax
incentives: the case of Tunisian companies. J. Financ. Report. Account. 20 (3/4),
639–666.
Kitzmueller, M., Shimshack, J., 2012. Economic perspectives on corporate social
responsibility. J. Econ. Lit. 50 (1), 51–84.
Kong, D., Cheng, X., Jiang, X., 2021. Effects of political promotion on local firms’ social
responsibility in China. Econ. Modell. 95, 418–429.
Kuo, T., Chen, H., Meng, H., 2021. Do corporate social responsibility practices improve
financial performance? A case study of airline companies. J. Clean. Prod. 310,
127380.
Lagasio, V., Cucari, N., 2019. Corporate governance and environmental social
governance disclosure: a meta-analytical review. Corp. Soc. Responsib. Environ.
Manag. 26 (4), 701–711.
Li, H., Cheng, X., Gao, S., 2017. The study of incentive effect of financial support on R&D
of high－tech enterprises. Stud. Sci. Sci. 35 (11), 1680–1690 (in Chinese).
Li, H., Lu, J., Guo, F., 2022. High speed rail and corporate social responsibility
performance: analysis of intra-regional location and inter-regional spillover.
Transport Pol. 128, 65–75.
Li, J., Zhao, X., 2021. Accelerated depreciation policy of fixed assets and capital-labor
ratio, 04 Finance Trade Econ. 42, 67–82 (in Chinese).
Li, S., Liu, Q., Lu, L., Zheng, K., 2022. Green policy and corporate social responsibility:
empirical analysis of the green credit guidelines in China. J. Asian Econ. 82, 101531.
Li, W., Huang, J., Shi, C., Yang, X., 2021. Does Share Pledging Promote or Impede
Corporate Social Responsibility? an Examination of Chinese Listed Firms.
Ekonomska Istraživanja ahead-of-print(ahead-of-print): 1-21.
Lin, Z., Liu, S., 2022. How do tax incentives affect firm innovation? Empirical evidence
from the policy of accelerated depreciation of fixed assets, 01 Stat. Res. 39, 91–105
(in Chinese).
Liu, W., Lv, Z., 2018. Impact of the new policy about accelerated depreciation of fixed
assets on total-factor productivity of manufacturing enterprises: an empirical study
based on difference-in-differences model. J. Cent. S. Univ. 24 (3), 78–87 (in
Chinese).
Liu, Y., Mao, J., 2019. How do tax incentives affect investment and productivity? Firm-
level evidence from China. Am. Econ. J. Econ. Pol. 11 (3), 261–291.
Lu, C., Zhu, K., 2021. Do tax expenses crowd in or crowd out corporate social
responsibility performance? Evidence from Chinese listed firms. J. Clean. Prod. 327,
129433.
Lu, J., Ren, L., Yao, S., Qiao, J., Mikalauskiene, A., Streimikis, J., 2020. Exploring the
relationship between corporate social responsibility and firm competitiveness. Econ.
Res. Ekonomska Istraživanja 33 (1), 1621–1646.
Maffini, G., Xing, J., Devereux, M.P., 2019. The impact of investment incentives:
evidence from UK corporation tax returns. Am. Econ. J. Econ. Pol. 11 (3), 361–389.
Neville, F., Byron, K., Post, C., Ward, A., 2019. Board independence and corporate
misconduct: a cross-national meta-analysis. J. Manag. 45 (6), 2538–2569.
Nour, A.I., Sharabati, A.A., Hammad, K.M., 2020. Corporate governance and corporate
social responsibility disclosure. Int. J. Sustain. Entrepren. Corp. Soc. Responsib. 5
(1), 20–41.
Ohrn, E., 2019. The effect of tax incentives on U.S. Manufacturing: evidence from state
accelerated depreciation policies. J. Publ. Econ. 180, 104084.
Oikonomou, I., Brooks, C., Pavelin, S., 2014. The effects of corporate social performance
on the cost of corporate debt and credit ratings. Financ. Rev. 49 (1), 49–75.
Okafor, A., Adeleye, B.N., Adusei, M., 2021. Corporate social responsibility and financial
performance: evidence from U.S tech firms. J. Clean. Prod. 292, 126078.
Orlitzky, M., Schmidt, F.L., Rynes, S.L., 2003. Corporate social and financial
performance: a meta-analysis. Organ. Stud. 24 (3), 403–441.
Panteghini, P.M., Vergalli, S., 2016. Accelerated depreciation, default risk and
investment decisions. J. Econ. 119 (2), 113–130.
Pucheta-Martínez, M.C., López-Zamora, B., 2018. Corporate social responsibility
strategies of Spanish listed firms and controlling shareholders’ representatives.
Organ. Environ. 31 (4), 339–359.
Samet, M., Jarboui, A., 2017. How does corporate social responsibility contribute to
investment efficiency? J. Multinatl. Financ. Manag. 40, 33–46.
Steinmüller, E., Thunecke, G.U., Wamser, G., 2019. Corporate income taxes around the
world: a survey on forward-looking tax measures and two applications. Int. Tax Publ.
Finance 26 (2), 418–456.
Sun, X., Gunia, B.C., 2018. Economic resources and corporate social responsibility.
J. Corp. Finance 51, 332–351.
L. Zhao and G. Peng
Wang, C., Qureshi, I., Guo, F., Zhang, Q., 2022. Corporate social responsibility and
disruptive innovation: the moderating effects of environmental turbulence. J. Bus.
Res. 139, 1435–1450.
Wang, F., Sun, J., Liu, Y.S., 2019. Institutional pressure, ultimate ownership, and
corporate carbon reduction engagement: evidence from China. J. Bus. Res. 104,
14–26.
Xu, B., Zeng, T., 2016. Profitability, state ownership, tax reporting and corporate social
responsibility: evidence from Chinese listed firms. Soc. Responsib. J. 12 (1), 23–31.
Xu, W., 2021. The Secret behind Staggered: A Primer to Staggered DID in the Field of
Empirical Economics (Available at SSRN.
14
Journal of Cleaner Production 385 (2023) 135647
Yu, J., Li, L., Fan, M., 2022. The effect of tax incentives on the performance of SMEs, 04
Tax Econ. Res. 27, 76–85 (in Chinese).
Zhao, L., Fang, H., 2022. Investment incentives and the relative demand for skilled labor:
evidence from accelerated depreciation policies in China. China Econ. Rev. 73,
101786.
Zhou, T., Gan, J., 2022. Institutional investors’ site visits and corporate social
responsibility: evidence from China. Econ. Modell. 115, 105965.
Zwick, E., Mahon, J., 2017. Tax policy and heterogeneous investment behavior. Am.
Econ. Rev. 107 (1), 217–248.