Having enterprises engaged in environmentally friendly behavior is an important part of reducing negative environmental impacts. This study makes a quantitative analysis against the backdrop of China's transitional economic system. The results show that politically-connected enterprises significantly reduce environmental expenditure, but this only holds for state-owned enterprises; private enterprises with political connections spend significantly more. Analysis of the efficiency of environmental expenditure indicates that, for private enterprises, environmental spending is used as a way to maintain political connections, with rent-seeking as the likely motivation. Politically-connected private enterprises have not reduced their emissions to the same extent as state-owned enterprises, despite increased expenditure. Given the scale of environmental degradation in China during a period of massive economic and social upheaval, the results of this analysis provide a quantitative case for policy change: governments should shift focus to the results that environmental spending produces.

This paper evaluates the real effects of the environmental policy at the firm level. Using the promulgation of the “Green Credit Guidelines" and national poverty alleviation strategy as a quasi-natural experiment, we find that:1) the Guidelines significantly inhibit the scale and maturity of debt financing for polluting companies; 2) the participation of enterprises in poverty alleviation efforts can effectively offset the restraining influence of the Guidelines. Our results are robust for parallel trend assumption and propensity score matching estimation. Further, we find that state-owned enterprises have decreased more significantly. These results indicate that the national poverty alleviation strategy could play a role in debt financing for polluting companies. Thus providing timely implications for regulators concerned with environmental protection.