Corporate Political Connections and Favorable Environmental Regulatory Enforcement

Amanda Heitz (), Youan Wang () and Zigan Wang ()
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Amanda Heitz: Department of Finance, A. B. Freeman School of Business, Tulane University, New Orleans, Louisiana 70118
Youan Wang: HKU Business School, The University of Hong Kong, Hong Kong
Zigan Wang: HKU Business School, The University of Hong Kong, Hong Kong

Management Science, 2023, vol. 69, issue 12, 7838-7859

Abstract: We examine whether the Environmental Protection Agency (EPA) uniformly enforces the Clean Air Act for politically connected and unconnected firms using a close election setting. We find no difference in regulated pollutant emissions or EPA investigations between the two groups, although connected firms experience less regulatory enforcement and lower penalties. These results are more pronounced for firms connected to politicians capable of influencing regulatory bureaucrats and for connected firms that are more important to their supported politicians. Taken together, our results show that campaign contributions can indirectly benefit firms by way of reduced environmental regulatory enforcement and penalties.

Keywords: political connections; elections; regulation (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:12:p:7838-7859

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