Balancing regulation and influence: the impact of political connections on corporate environmental investment in China

Abstract This paper explores the interaction between environmental regulation intensity, political connections, and investment in environmental protection. The results reveal that strict environmental regulations significantly reduced enterprises' environmental investments during the sample period. Furthermore, stronger political connections between corporate executives and the government have been found to hinder improvements in environmental investments. Notably, political connections moderate this negative impact—especially in Eastern China—turning it into a positive influence. The heterogeneity analysis shows that these regulatory policies notably adversely affect environmental investment in polluting industries and large-scale firms. These findings provide new insights into the enforcement of environmental investments.