Does Entrepreneur Invest More in Environmental Protection When Joining the Communist Party? Evidence from Chinese Private Firms

Youliang Yan and Xixiong Xu

Emerging Markets Finance and Trade, 2022, vol. 58, issue 3, 754-775

Abstract: This study examines the role of affiliation with the ruling Communist Party in corporate environmental investment. Using a nationwide survey of Chinese private firms, we find that the Party membership of private entrepreneurs has a positive effect on corporate environmental investment, which suggests that Party status severs as a communication bridge and goal coordinator between the government and firms, thus encouraging them to participate more in environmental activities. Furthermore, this effect is more prominent when firms are located in regions with stricter legal supervision and lower levels of corruption, involve in a government-created business association and have better performance in profitability. Mechanism tests show that entrepreneurs with Party membership will promote firms to form a closer government-firm interaction and develop a better sense of social responsibility. Our findings highlight the entrepreneur’s Party status as an important driver of environmentally responsible corporate decision-making.

Date: 2022
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DOI: 10.1080/1540496X.2020.1848814

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