Virtue over Deception: Confucian Culture and Corporate Greenwashing Behavior

Greenwashing behavior of enterprises is a false environmental protection phenomenon that not only damages investor trust but also hinders sustainable development. China’s still-imperfect formal institutions have a limited effect on greenwashing behavior, making it theoretically and practically significant to explore the effect of informal institutions on greenwashing behavior. Based on this, we examine the effect of Confucian culture on greenwashing behavior and its internal mechanisms using a sample of Chinese A-share listed firms from 2014 to 2021. The results show that Confucian culture can inhibit corporate greenwashing behavior, primarily through three mechanisms: alleviating financing constraints, promoting green innovation, and reducing information asymmetry. Heterogeneity analysis reveals that the inhibitory effect of Confucian culture on greenwashing behavior is stronger in non-state-owned firms, heavily polluting firms, firms whose executives lack overseas experience, and firms with a lower proportion of female executives. Further research indicates that Confucian culture plays a stronger role in inhibiting greenwashing behavior when formal institutions are weaker, demonstrating a substitution effect between formal and informal institutions. Therefore, Confucian culture should be continuously promoted and preserved to establish a long-term mechanism for informal institutions to inhibit corporate greenwashing behavior.