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Corporate Political Connections and Favorable Environmental Regulatory Enforcement

Author

Listed:
  • 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)

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.

Suggested Citation

  • Amanda Heitz & Youan Wang & Zigan Wang, 2023. "Corporate Political Connections and Favorable Environmental Regulatory Enforcement," Management Science, INFORMS, vol. 69(12), pages 7838-7859, December.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:12:p:7838-7859
    DOI: 10.1287/mnsc.2020.3931
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