Environmental authority centralization and corporate ESG greenwashing: Evidence from environmental vertical management reform in China

An environmental management system is a critical institutional factor that influences corporate green development. Environmental authority restructuring reallocates responsibilities between local administrations and environmental regulatory bodies. Covering 2009 through 2022, the study’s panel dataset comprises private enterprises traded on China’s A-share exchange. The environmental vertical management reform (EVMR) is treated as a quasi-natural experiment, and a staggered difference-in-differences approach is adopted to examine how centralizing environmental authority influences corporate ESG greenwashing. The empirical results indicate that the EVMR leads to a significant increase in ESG greenwashing behavior among private enterprises, a conclusion that holds under multiple robustness tests. However, the EVMR does not exhibit this negative effect on state-owned enterprises. Our mechanism discussion indicates that the EVMR increases corporate compliance pressure due to intensified environmental regulation and heightened green competition. Nevertheless, it fails to provide resource support to private enterprises, while not alleviating the phenomenon of information asymmetry regarding the environment, thereby prompting private enterprises to engage in ESG greenwashing. It is worth noting that digital transformation and decentralized ownership structures mitigate this effect. The EVMR’s impact tends to be stronger in areas with limited fiscal resources and lower financial regulatory intensity. Additionally, the impact is greater among enterprises operating in sectors that are neither heavily polluting nor technology-intensive, highlighting the presence of substantial policy heterogeneity. These results provide important implications for environmental governance reforms and green transitions in emerging economies.