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Environmental Regulation, Political Connections, and Corporate Green Investment

Author

Listed:
  • 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)

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.

Suggested Citation

  • Rui Zhu & Mengting Liu & Liyu Long & Congjia Huo, 2022. "Environmental Regulation, Political Connections, and Corporate Green Investment," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:20:p:13357-:d:944699
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    References listed on IDEAS

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