Analysis of the impact mechanism of environmental regulations on corporate environmental proactivity—based on the perspective of political connections

Zhaoqiang Yi and Lihua Wu

Business Ethics, the Environment & Responsibility, 2022, vol. 31, issue 2, 323-345

Abstract: Previous studies have demonstrated the favorable effects of political connections on corporate environmental proactivity (CEP). However, few studies have further verified whether this is definitively the case under environmental regulations and their underlying reasons, which would help elucidate the performance and motivation of politically connected firms’ (PCFs’) environmental proactivity. Using data from Chinese A‐shares‐listed industrial firms from 2010 to 2016, we find that environmental regulations can significantly improve CEP. Compared with non‐politically connected firms (NPCFs), PCFs are more responsive to environmental regulations. Counterfactual analysis based on corporate resource conditions suggests that firms that are more supported by government in debt financing and show higher environmental proactivity are only found in PCF samples. In order to maintain this political relationship and continuously obtain debt financing support, PCFs tend to “bind” their business decisions to the government’s environmental governance objectives and display higher environmental proactivity. In summary, PCFs’ environmental proactivity involves self‐interest decisions based on their resource conditions.

Date: 2022
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https://doi.org/10.1111/beer.12413

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Persistent link: https://EconPapers.repec.org/RePEc:wly:buseth:v:31:y:2022:i:2:p:323-345

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