Corporate Political Connections and Favorable Environmental Regulatory Enforcement
Management Science, Forthcoming
39 Pages Posted: 15 Nov 2019 Last revised: 11 Feb 2021
Date Written: November 1, 2020
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, though 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.
Keywords: political connections, elections, regulation
JEL Classification: D72, D73, G18
Suggested Citation: Suggested Citation