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Do Politically Connected Firms Pay Less Toward Environmental Protection? Firm‐level Evidence from Polluting Industries in China
Author(s) -
Wang Lihong,
Kang Shaoqing,
Wu Hongjun
Publication year - 2021
Publication title -
abacus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.632
H-Index - 45
eISSN - 1467-6281
pISSN - 0001-3072
DOI - 10.1111/abac.12210
Subject(s) - incentive , sample (material) , china , business , politics , causality (physics) , investment (military) , selection bias , panel data , large sample , accounting , monetary economics , economics , market economy , econometrics , physics , medicine , chemistry , statistics , mathematics , chromatography , quantum mechanics , pathology , political science , law
This study empirically investigates the role of political connections in corporate environmental spending. It employs a sample of listed Chinese firms from polluting industries within the 2010–2013 period. Our empirical results show that having politicians as directors reduces the magnitude of discharge fees. We also find that such reductions are more pronounced in firms with a higher ratio of politically connected directors (i.e., listed Chinese polluting firms that are privately controlled). This negative relationship is robust to various model specifications (e.g., a sample of polluting firms after addressing the sample selection bias and reverse causality without an increase in new investment). Moreover, we observe that the negative relationship between political connections and discharge fees is stronger in listed Chinese polluting firms located in more polluted regions. Meanwhile, a polluting firm's incentive to engage in environmental protection, measured by firm‐level environmental awards (incidents), alleviates (exacerbates) the negative relationship. Finally, the impact of politically connected directors on discharge levies is explicitly driven by having local officials and officials from the home province as directors.