Influence Of Political Connections On Private Enterprises’ Environmental Protection Investment

China’s economic has developed rapidly and made remarkable achievements since the reform and opening up for about forty years.However,environmental pollution,resource exhaustion and ecological destruction have become increasingly serious in the process of rapid economic development,which seriously restricted the sustainable development of China’s economy and endanger the human health and survival.How to effectively protect natural resources and ecological environment is one of the most urgent problems faced by China’s social and economic development and the realization of the "Chinese dream",and is also an important topic of common concern between the theoretical and practical circles.Enterprises as an important subject in social economic activities,play an important role in promoting economic development.It’s the main producers of environmental pollution at the same time.They should shoulder the main responsibility of pollution control and environmental protection to maintain the coordinated development of economy and environment.However,due to the public goods nature of the environmental resources,the negative externalities of environmental pollution,and the complex characteristics of environmental investment which combine the large amount of capital,long investment cycle and low economic benefit.Most enterprises is unwilling to actively carry out investment in environmental protection and pollution control.The government needs to conduct environmental control through "tangible hands" to solve the market failure in environmental protection.Enterprises are important targets for the implementation of government environmental regulation policies under these circumstances.The government’s environmental protection measures are transmitted through of enterprises which act like the medium carrier,and enterprises finally implement policies through environmental investment behaviors.The political connection is the concretion of the relationship between the government and the enterprise.Because of the existence of corporate political connection,the decision-making mechanism and transmission process of environmental investment behavior between government and enterprises has become a problem which is worthy of exploring deeply.At present,scholars have published a large number of research results whether it is for political or environmental investment,which greatly enrich the content and depth of research in these two fields.But there is less literature on the combination of political connection and enterprise environmental investment behavior.In addition,the existing research on environmental protection investment is mainly focused on environmental investment of government and enterprise which is led by government.There are few empirical researches on the micro level data of enterprises.Taking micro private enterprises as the research object,this paper studies the relationship between political connection and environmental investment behavior,which has important theoretical and practical significance.From theoretical perspective,this paper studies the relationship between corporate environmental investment and political connections based on the micro level data of private enterprises.This paper explores the impact of political connections on corporate environmental investment under the condition of differentiated regional economic development and environmental regulation intensity.This will further enrich the theoretical framework of the influence of political connection on environmental investment in enterprises.From the practical point of view,it can provide useful guidance for enterprises to build healthy and benign relationship with the government by studying the influence and mechanism of political on connection corporate environmental investment behavior.It can also formulate and improve relevant environmental laws and regulations and policies for the government.That helps government to effectively play the role of "tangible hand",and provide an important reference for enterprises to guide their environmental investment.Based on the multidisciplinary knowledge of environmental economics,political economics,accounting and finance,we combine the way of empirical research with normative research in this paper,and mainly discuss the following three questions:First,we discuss the influence and mechanism of political connection on the corporate environmental protection investment.We selectively analyzing the function of the government’s environmental protection subsidy in this part,and analysis the influence of political connection of different executive levels and different types on the enterprise’s environmental investment in detail.Second,we discuss how the political relationship affects the enterprise’s environmental investment under the intensity of different environmental regulations.This paper uses a variety of methods to measure the intensity of regional environmental regulation.We empirically testing the impact of environmental regulation intensity on environmental protection investment,and focus on the regulation effect of environmental regulation on the relationship between political connection and corporate environmental investment.Third,we explore the relationship between political connection and corporate environmental investment under the condition of differentiated regional economic development,focusing on the impact of political connections on the scale of corporate environmental investment.The main conclusions of this paper are as follows:First,the corporate environmental investment is growing,but the total amount is relatively small.From 2008 to 2015,the total amount of environmental protection investment of Listed Companies in heavy pollution industry has basically maintained the trend of growth,but the total amount of them is relatively small.This phenomenon is more severe for private enterprises.Although private enterprises’ environmental investment has maintained a growth trend during the research period,their volume is even smaller.Furthermore,more of their environmental investment is a superficial expense for environmental costs,and the amount of capital invested in environmental protection equipment updates and technology upgrades is smaller.Therefore,the performance of private enterprises in the field of environmental protection investment is not excellent.More environmental responsibility should be taken by private enterprises under the tide of ecological civilization construction.Second,political connection will help enterprises to increase investment in environmental protection.Through empirical analysis,it is found that the scale of environmental protection investment of private enterprises with political connections is higher than that of private enterprises with no political connections.That means,political connections can promote private enterprises to increase environmental investment.From the perspective of the source of environmental protection investment,the cost of environmental protection investment increased significantly by private sector,and the increase of capitalized environmental investment is relatively small.Besides,private enterprises with central political connections are more aware of the central government’s environmental intentions and decisions,and are more inclined to implement the national environmental protection requirements and assume more responsibility for environmental protection.In addition,private enterprises with local political connections sometimes have some tacit agreement with local governments,which caters to the needs of local governments in pursuit of economic achievement,and "keep a close eye on implementing environmental policies",thus weakening investment in environmental protection to a certain extent.Third,political connections can help private enterprises get more government environmental protection subsidies and further increase enterprise environmental investment.Political connections do help companies get more government subsidies,especially the political connections between the chairman and the CEO.The government’s environmental subsidy from private enterprises is mainly from the local political connections.The central political connections do not bring a significant increase in the government’s environmental subsidies.Fourth,regional environmental regulation has an inverted U regulation effect on the relationship between enterprise political connection and environmental investment.The intensity of environmental regulation is positively related to the scale of environmental protection investment of private enterprises,the stronger the constraints of environmental regulation,the more environmental protection investment of private enterprises.At the same time,the intensity of regional environmental regulation will change the original linear relationship between the political connection of private enterprises and the investment of environmental protection.It is found in this paper that the existence of a critical value of the intensity of environmental regulation makes the impact of the political connection of private enterprises on its environmental investment in an inverted U type.That is to say,when the regional environmental regulation strength is lower than a critical value,with the increase in the intensity of environmental regulation,the political connection of private enterprises is helpful to promote the increase of investment in environmental protection;when the regional environmental regulation intensity above this critical value,the higher the strength of environmental regulation,the political connection of private enterprises but not conducive to the expansion of business the scale of investment in environmental protection.Fifth,the difference of regional development conditions can significantly affect the relationship between the political connection of private enterprises and the investment in environmental protection.The higher the level of economic development,the more environmental investment in local enterprises,and the environmental investment scale of local enterprises is relatively low with low level of economic development.And the empirical research shows that the impact of private enterprises’ political connections on their environmental investment has been significantly negatively impacted under the differentiated regional economic conditions.That means,the private enterprises with political connections can significantly and substantially increase the investment in environmental protection in places where the level of economic development is high.While the positive effect of the political connection of private enterprises on the scale of environmental protection investment will have a relatively obvious decline in the place where the economic development level is low.This will lead to the scale of enterprises’investment in environmental protection is limited.In extreme cases,the scale of environmental protection investment may be reduced.The main contributions of this paper are reflected in the following aspects:First,this paper enrich the research literature of enterprise environmental protection investment factors and economic consequences of the political connections.On the one hand,this paper makes a beneficial supplement to the research field of the influencing factors of enterprise environmental protection investment from the perspective of political connection,on the other hand,it also makes a positive attempt to test the influence of political connection on environmental governance,so as to understand the influence of political connection on enterprise management decision more comprehensively.Second,when discussing the influence and function mechanism of political connection on private enterprises’ environmental investment,the government’s environmental subsidy is included in the research framework,which improves the research route of this problem.At the same time,this paper divides the enterprise environmental protection investment into the capitalization of environmental protection investment and the expensed cost of environmental protection investment,in order to better understand the private enterprises’decision in the face of environmental pressure from the government.Third,this paper not only focuses on the issue of "whether there is political connection",but also pay attention to the issue of "how strong the political connection is",and discusses the political connection between different executive levels of private enterprises and different levels of government.This paper describes the political connection and strength of private enterprises from multiple dimensions,and further clarifies the boundary of political connection.Fourth,this paper comprehensively considered the regional environmental regulation intensity and regional economic development pressure on the political connections and private enterprises environmental protection investment relationship of external regulation effect,so as to better play the role of the government’s "tangible hands" to provide a direct empirical basis.