Political influence and firms’ perception in the framework of transition risk: evidence from a survey of EU enterprises

Purpose This study investigates how political influence and regulatory uncertainty affect firms’ perceptions of environmental regulations as obstacles within the European Union (EU). It focuses on the role of transition risks in shaping business behavior amid well-defined environmental objectives. Design/methodology/approach The analysis draws on data from the 2019 World Bank Enterprise Survey, which includes a dedicated Green Economy module. The final dataset covers 4,366 enterprises across 10 EU countries. The study employs a logistic regression framework with Bayesian Model Averaging (BMA) for variable selection and robustness checks through instrumental variable (IV) estimation. Findings Results show that firms perceiving environmental regulations as obstacles are also more likely to report the use of political influence (e.g. informal payments or gifts). This relationship is particularly strong among large and manufacturing firms. Furthermore, regulatory uncertainty – particularly among small firms – is a significant driver of perceived regulatory burden. Firms complying with environmental policies through monitoring rather than strategic targets also report higher perceived obstacles. Practical implications The findings suggest that policy uncertainty and political dynamics play a critical role in shaping firms’ compliance behavior. Policymakers should consider these dimensions when designing environmental regulations and supporting mechanisms to ensure policy effectiveness and credibility. Originality/value This paper contributes to the literature by examining the intersection of political influence, regulatory uncertainty, and environmental compliance in a high-income regional context. It highlights that even in the EU, where climate goals are clearly established, transition risks remain a substantial concern for enterprises.