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Table 4 Analysis on mechanism: effect of being beneficiaries of ITC and TID on profitability

From: Tax incentives and environmental protection: evidence from China’s taxpayer-level data

Dependent variable: ROA

Original value

Weighted growth

Independent variables

(1)

(2)

(3)

(4)

Part A: benchmark sample

 Lagged ITCdummy

−0.008 (0.008)

−0.008 (0.008)

−0.041 (2.413)

−1.384* (0.743)

 lagged TIDdummy

−0.011 (0.012)

−0.010 (0.013)

4.773 (5.487)

2.680 (6.098)

 Taxpayer-level control variables

Yes

Yes

Yes

Yes

 Taxpayer fixed effect

Yes

Yes

Yes

Yes

 Year fixed effect

Yes

Yes

Yes

Yes

 Province and province-year fixed effect

Yes

No

Yes

No

 Industry and industry-year fixed effect

No

Yes

No

Yes

 Within R-square

0.013

0.010

0.005

0.001

 Observation

25003

25003

24814

24814

Part B: benchmark sample without SOEs

 Lagged ITCdummy

−0.014 (0.009)

−0.014 (0.009)

−1.472** (0.727)

−1.510** (0.663)

 Lagged TIDdummy

−0.011 (0.015)

−0.011 (0.015)

4.869 (6.040)

3.340 (6.372)

 Taxpayer-level control variables

Yes

Yes

Yes

Yes

 Taxpayer fixed effect

Yes

Yes

Yes

Yes

 Year fixed effect

Yes

Yes

Yes

Yes

 Province and province-year fixed effect

Yes

No

Yes

No

 Industry and industry-year fixed effect

No

Yes

No

Yes

 Within R-square

0.014

0.011

0.002

0.003

 Observation

22903

22903

23939

23939

  1. Notes: Superscript symbols "*, **, and ***" represent 10 %, 5 %, and 1 % significant level respectively. The two coefficients in Italics should be emphasized for they indicate that ITC hurts firms' profitability. In all columns, we use specifications similar to Eq. (2), and residuals are clustered at province-industry level. In columns 1–2, the dependent variable is ROA, while that for columns 3–4 is weighted growth of ROA. Taxpayer-level control variables include age and size. We also try adding other factors like ownership, wage, capacity and import, and industry-level characteristics, and the results are quite similar. Meanwhile, we try adding region-level variables like real GDP per capita and some others but find that their coefficients are not significant, and the key results experience no difference. The within R-square is relatively small, for we have controlled many fixed effects in estimation. For other notes, see Table 3