When firms talk, do they act? The impact of environmental strategies and actions on executive promotion in China

This study investigates the relationship between the environmental strategy of state-owned enterprises (hereafter SOEs) and executive promotion in China. We partition a firm's environmental strategy into Wordy and Nonwordy, and its environmental action into Feasance and Nonfeasance. We define the combination of Wordy and Nonfeasance as greenwashing. Based on a sample of SOEs, we find that SOE executives from greenwashing firms are more likely to be promoted than those from other firms. This evidence is robust to endogeneity tests. We further show that this relation is more pronounced for local SOEs. Moreover, compared with firms characterized by “Speak less & Do more” (“Speak less & Do less”), executives served in firms which “Speak more & Do more” (“Speak more & Do less”) are more likely to get promoted. However, there is no significant promotion difference for executives served in firms characterized by “Speak more & Do less” and “Speak more & Do more”. Overall, our results suggest that words indeed speak louder than actions in the current official system of SOE executives and it also indicates that the evaluation mechanism for SOE executives is inefficient so far.