Environmental Regulation, Political Connections, and Corporate Green Investment

Rui Zhu, Mengting Liu, Liyu Long and Congjia Huo ()
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Rui Zhu: Economics and Management School, Changsha University of Science and Technology, Changsha 410114, China
Mengting Liu: Hunan Xiangli Salt Chemical Co., Ltd., Changde 415200, China
Liyu Long: Management School, Hunan University of Information Technology, Changsha 410151, China
Congjia Huo: Department of Economics, Business School (School of Quality Management and Standardization), Foshan University, Foshan 528000, China

Sustainability, 2022, vol. 14, issue 20, 1-20

Abstract: Based on the implementation of China’s new Environmental Protection Law (the new EPL), using the difference-in-differences (DID) method and the PSM method, this paper examines the impact of changes in local environmental governance motivation on corporate environmental protection investments before and after the implementation of the new EPL. The results show that, before introducing the new EPL, the scale of green investment of politically connected enterprises was significantly lower than that of other enterprises; after the introduction of the new EPL, the increase in environmental protection investment by politically connected enterprises was significantly higher than that of other enterprises. This promotion effect is more potent for formally politically connected enterprises. Given this, we suggest that governments need to achieve fair law enforcement of environmental protection and avoid the distortion of ecological protection investment by political connections during economic transitions.

Keywords: environmental regulation; political connections; environmental protection investment; new environmental protection law; difference in difference (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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