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Greenwashing: Do Investors, Markets and Boards Really Care?

Author

Listed:
  • Erdinc Akyildirim

    (Bogazici University and University of Zurich)

  • Shaen Corbet

    (Dublin City University ; University of Waikato)

  • Steven Ongena

    (University of Zurich; Swiss Finance Institute; KU Leuven; NTNU Business School; CEPR)

  • Les Oxley

    (University of Waikato)

Abstract

What are the financial repercussions of corporate greenwashing? To answer this question, we focus on the impact of such ethically flawed practices on corporate stock market performance. We find a broad devaluation, with an average abnormal stock return of -0.63%, indicating investor disapproval of deceptive environmental claims. We further find a shift in investor sentiment in parallel with the growth of social media, underscoring the potential for future swift and extensive reputational damage. National regulatory power is also identified as a determinant of market response intensity. Industries inherently associated with environmental concerns, particularly energy and manufacturing, experienced more pronounced market reactions, pointing to heightened stakeholder scrutiny. Furthermore, nations with robust environmental values and consciousness witnessed intensified market penalties for greenwashing, revealing the interplay of societal values, national rules and investor sentiment.

Suggested Citation

  • Erdinc Akyildirim & Shaen Corbet & Steven Ongena & Les Oxley, 2023. "Greenwashing: Do Investors, Markets and Boards Really Care?," Swiss Finance Institute Research Paper Series 23-90, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2390
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    Keywords

    Greenwashing; ESG; CSR; Regulation; Reputational Risk;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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