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The dark side of site visits: How institutional investors unintentionally foster ESG greenwashing

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  • Wang, Yanhui
  • Fu, Chuanrui
  • Zou, Jingjing
  • Chang, Wei

Abstract

Conventional wisdom holds that Institutional Investors' Corporate Site Visits(IICSV) serve as a vital tool for corporate oversight and information acquisition. Challenging this view, this study uncovers their unintended dark side from an institutional economic and market equilibrium perspective: rather than curbing misconduct, such visits can inadvertently foster corporate ESG greenwashing.This paper examines the impact of IICSV on ESG greenwashing. We find that IICSV significantly promote corporate ESG greenwashing.This means that IICSV significantly increase the gap between symbolic ESG disclosure and substantive performance. From the perspective of market transmission mechanism, IICSV raises negative media attention and analyst coverage, which strengthens firms’ tendency to engage in greenwashing as a legitimacy-seeking strategy. Further heterogeneity tests show that this effect is more pronounced among firms not audited by the Big Four, for firms held by transactional rather than stable institutional investors, for those in the growth stage of their life cycle, and for firms located in regions with lower marketization progress.Our findings unveil a critical paradox in informal monitoring mechanisms and offer nuanced implications for regulators seeking to design effective ESG governance frameworks that mitigate perverse incentives.

Suggested Citation

  • Wang, Yanhui & Fu, Chuanrui & Zou, Jingjing & Chang, Wei, 2026. "The dark side of site visits: How institutional investors unintentionally foster ESG greenwashing," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 355-371.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:355-371
    DOI: 10.1016/j.eap.2026.03.027
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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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