Can Political Connections Buffer Firm Pollution?

Abstract

Firm pollution is a top concern for both the public and the government. Previous studies on firm pollution mainly focus on formal environmental regulations, but rarely explore informal mechanisms such as political connections, a significant informal means for government intervention. The research explores how political connections affect firm pollution, and tests the moderating effects of market competition, state ownership and environmental regulation on this relationship from the perspective of institutional logics. Using empirical data of the most polluting publicly listed enterprises in China, the research demonstrated that politically connected firms participate in pollution remarkably less probably compared to non-connected firms. Moreover, market competition and state ownership significantly strengthen the focal relationship, while the moderating effect of environmental regulation is insignificant. The study provides novel insights into political connections research, institutional logics perspective and corporate unethical behavior.