Abstract: By applying the partially observable Bivariate Probit model, this paper systematically studies the impact of the legal environment, the types of political connections and the nature of property rights in which the enterprises exist on their illegal behaviors. The empirical results show that the improvement of the legal environment and the political connections of the enterprises can reduce the probability of the company’s violations, and this effect is mainly reflected in the political relations of the officials. From the point of the nature of the property rights of the enterprise, the officers’ political connections of the state-owned enterprises can reduce the probability of being investigated and punished for their irregularities, while the improvement of the legal environment can reduce the tendency of their violations, thus weakening the effect of political connections. As for private enterprises, although the improvement of the legal environment can also reduce the tendency of their violations, yet the political connections have no impact on the probability of being investigated or punished for their violations.

Key words: legal environment; political connections; irregularity investigation; Bivariate Probit