The impact of environmental protection tax on corporate bank borrowing costs

This study examines the impact of China’s 2018 Environmental Protection Tax (EPT) on firms’ bank borrowing costs. Using a staggered difference-in-differences design and panel data on Chinese listed firms from 2013 to 2022, the results indicate that the EPT policy significantly increases borrowing costs, as reflected in higher financial expenses and expense ratios. Robustness tests confirm the validity of these results. This effect is more pronounced among non-state-owned and high-pollution firms, suggesting that ownership structure and pollution intensity moderate the financial consequences of environmental regulation. The findings reveal that while the EPT advances environmental objectives, it simultaneously raises financing burdens for certain firms, underscoring the need for complementary green finance policies.