Abstract: This paper investigates the impact of political intervention on corporate environmental performance from the unique perspective of Party involvement in governance by using state-owned listed companies in heavy pollution industries for the period of 2004 to 2018. Based on the manually collected information on the overlaps between members of the Party committee and those of the board of directors, the top management team and the board of supervisors (the management team), we find that firms with higher level of Party involvement in corporate governance are more likely to have investment related to environment protection, and have higher level of environmental investment. Moreover, we conclude that the relationship between Party involvement and environmental performance is driven mainly by the effect of Party involvement in the board of directors. Further evidences show that the positive effect of Party involvement on environmental performance is more pronounced for firms (1) that have lower media attention; (2) that have more levels in the pyramid structure of ultimate controller; and (3) whose CEO is a member of Chinese Communist Party. Various robustness tests confirm our main conclusions. Our results provide a new micro perspective for the role of the Party involvement in state-owned enterprises, and have important policy implications for the firm-level environmental governance in China.

Key words: Party committee, corporate governance, corporate environmental performance, state-owned enterprise