With great power comes great responsibility: exploring the role of government affiliation in subsidies and water pollution treatment in China

China’s rapid economic development has brought about serious environmental pollution problems, and the Chinese government has taken a variety of measures to mitigate the water pollution problem. A firm’s government affiliation can affect the resources it receives, but given the existence of different levels of government, there may be differences in the resources it receives. Whether there are differences in the access to resources and environmental behaviors of firms affiliated with different levels of government needs to be explored. This paper examines the subsidies received by firms belonging to different levels of government, and the environmental behavior of firms after they have received subsidies. It is found that the subsidies received by firms increase by 8.2% for each level of governmental hierarchy, and the level of water pollution control increases by 3.2% for each 1% increase in subsidies received by firms. Therefore, the governmental affiliation of firms is an important resource for both firms and the government, from which firms obtain resources and the government can pass environmental assessments. Maintaining government affiliation is important for both parties.