Effect of political connection on corporate environmental investment: evidence from Chinese private firms

ABSTRACT

This paper investigates the effect of political connections on corporate environmental investment. Using the survey data gathered from Chinese private firms, we find that political connection is significantly positively associated with environmental investment. The results are still valid after using Heckman two-stage approach and propensity score matching method to mitigate endogenous problems. Furthermore, we find the positive role of political connection in environmental investment is more pronounced for the firms joining the government-controlled business association, namely the All-China Federation of Industry and Commerce (ACFIC).

KEYWORDS:

• Corporate environmental investment
• political connection
• private firms
• China

JEL CLASSIFICATION:

• E22
• G34
• O16

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ According to the question in the survey ‘How much money did enterprises invest in environmental protection during the year?’ we capture the data of corporate environmental investment and define our dependent variables.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [grant number 71572019], [grant number 71802169]; the Ministry of Education of Post-Philosophical and Social Sciences Research Project [grant number 18JHQ079]; and the Fundamental Research Foundation for the Central Universities [grant number 2019CDJSK02XK11].