Political Risk and Toxic Releases

44 Pages Posted: 13 May 2021

See all articles by Yongqiang Chu

Yongqiang Chu

Belk College of Business, UNC Charlotte

Savannah Guo

University of Nevada, Reno - College of Business Administration

Daxuan Zhao

School of Business, Renmin University of China

Michael Zheng

Texas Tech University - Rawls College of Business

Date Written: May 12, 2021

Abstract

Studying the environmental impact of political risk, we find that firms more exposed to political risk decrease the releases of toxic chemicals and close polluting plants. We also find that the effect is not driven by decreases in production activities and that non-political risk does not have a similar impact. Further analyses reveal that firms more exposed to political risk incur higher environmental regulatory costs and invest more in green technology. Exploiting plausibly exogenous variations in political risk generated by the congressional redistricting following the 2010 decennial census, we show that the effect is likely to be causal. The result suggests that political risk exposure causes firms to reduce toxic releases to mitigate environmental regulatory actions.

Keywords: Political Risk, Toxic Release, Environment, Regulation

JEL Classification: G23, G30, G32

Suggested Citation

Chu, Yongqiang and Guo, Savannah and Zhao, Daxuan and Zheng, Michael, Political Risk and Toxic Releases (May 12, 2021). Available at SSRN: https://ssrn.com/abstract=3844663 or http://dx.doi.org/10.2139/ssrn.3844663

Yongqiang Chu (Contact Author)

Belk College of Business, UNC Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
7046877695 (Phone)

Savannah Guo

University of Nevada, Reno - College of Business Administration ( email )

1664 N Virginia St
Reno, NV 89557
United States

Daxuan Zhao

School of Business, Renmin University of China ( email )

59 Zhongguancun Street
Beijing, 100872
China

HOME PAGE: http://daxuanzhao.weebly.com/

Michael Zheng

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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