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Environmental regulations and the greenwashing of corporate ESG reports

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  • Fang, Chenli
  • Wang, Zhitao
  • Zhao, Lu

Abstract

This study uses data from listed companies that have published corporate social responsibility (CSR) reports from 2008 to 2022 to construct a greenwashing index for environmental, social, and governance (ESG) reports and explores the effect of environmental regulations on the greenwashing of ESG reports. The results show that environmental regulations significantly increase the greenwashing of corporate ESG reports and corporate ESG disclosure caters to certain policies. The results of mechanism test show that environmental regulations force companies to greenwash their ESG reports more by increasing the financing constraints faced by companies. The results of heterogeneity analysis reveal that environmental regulations have a more pronounced effect on the greenwashing of ESG reporting in companies with a low level of institutional ownership and no foreign ownership and highly polluting enterprises. These results show that environmental regulations aimed at strengthening environmental governance in companies have unintended negative effects on the quality of corporate ESG disclosure. The findings of this study both analyze the causes of the greenwashing of corporate ESG reports from the perspective of environmental regulations and provide insights into how to curb the greenwashing and improve the information environment of the capital market.

Suggested Citation

  • Fang, Chenli & Wang, Zhitao & Zhao, Lu, 2025. "Environmental regulations and the greenwashing of corporate ESG reports," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1469-1481.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1469-1481
    DOI: 10.1016/j.eap.2025.07.030
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    2. Jingnan Wang & Yue Liu & Boyan Zou & Tonghai Ji, 2025. "Green Light or Green Burden: ESG’s Dual Effect on Financing Constraints in China’s Heavily Polluting Industries," Sustainability, MDPI, vol. 17(20), pages 1-31, October.
    3. Meilan Han & Yuezhou Dong & Xiling Wu, 2025. "The Impact of Environmental Regulation on Greenization Level of Manufacturing Industrial Chains: A Dual Perspective of Direct Effects and Spatial Spillovers," Sustainability, MDPI, vol. 17(20), pages 1-24, October.

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    JEL classification:

    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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