Social dishonesty and corporate green innovation

As a win-win strategy, green innovation can balance environmental protection and economic benefits. Previous studies have mainly focused on the impact of formal institutions, such as ecological tax and environmental regulations, on green innovation, while the role of informal institutions has been largely overlooked. This study investigates whether social dishonesty is a crucial factor that inhibits corporate green innovation, using defaulted executors announced by the Supreme People’s Court of China between 2013 and 2019 as a research sample. The findings indicate that social dishonesty significantly inhibits enterprises’ green innovation, even after conducting robustness tests. Mechanistic tests reveal that social dishonesty impairs green innovation by exacerbating firms’ financing constraints, increasing the cost of debt, and lowering their ESG scores. The study also shows that the negative impact of social dishonesty on enterprises’ green innovation is more significant for non-state firms and those with irregularities, while non-negative media coverage and government environmental subsidies effectively mitigate this effect. Therefore, this study highlights the vital role of informal institutions in shaping firms’ green innovation behavior, particularly in emerging markets and regions committed to green development.