Abstract: As one of the key market-based environmental regulation policies in recent years, the green transformation of the tax system has not only exerted a significant influence on enterprises’ green transition and development but also reshaped the characteristics of systemic risk in the capital market. This paper investigates the commonality in liquidity effect of tax system greening. Research findings indicate that the greening of the tax system generates the commonality in liquidity effect, specifically reducing the commonality in liquidity of high-pollution enterprises in regions with elevated tax burden standards. Furthermore, executive environmental experience and corporate green governance behaviors can mitigate the commonality in liquidity effect of tax system greening. Mechanism analysis reveals that tax system greening influences commonality in liquidity by altering investor green preferences and enhancing corporate green information quality. Further research demonstrates that the green finance reform pilot zone policy attenuates the impact of tax system greening on commonality in liquidity. Additionally, the greening of the tax system also reduces the stock price synchronicity of heavily polluting enterprises in regions with increased tax burden standards, reflecting the characteristics of price-volume resonance in the capital market. Heterogeneity analysis shows that the commonality in liquidity effect is more pronounced in cases of high investor attention and non-state-owned enterprises implementing tax system greening. This study provides a new perspective on the economic consequences of tax system greening, enriches the literature on the determinants of commonality in liquidity, and offers practical implications for the next round of tax system greening policies as well as for preventing and mitigating financial risks.

Key words: greening the tax system, enterprise green transformation, commonality in liquidity, systemic financial risk, DDD model