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ESG greenwashing and equity mispricing: Evidence from China

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  • Lin, Xudong
  • Zhu, Hao
  • Meng, Yiqun

Abstract

This paper explores the impact of ESG greenwashing on equity mispricing. Using a firm-level panel dataset from 2011 to 2021, we posit and document that ESG greenwashing provokes investor sentiment, thus leading to equity mispricing. Compared with the relationship with underpricing, the positive relationship between ESG greenwashing and overpricing is more significant. Cross-sectional tests show that the impact is especially evident in the pre-COVID-19 era, in firms with low-quality external auditing, in firms with low levels of industry competition, and in firms operating in less environmentally regulated areas. Furthermore, we find that peer firms' ESG greenwashing is positively related to equity mispricing.

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  • Lin, Xudong & Zhu, Hao & Meng, Yiqun, 2023. "ESG greenwashing and equity mispricing: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009789
    DOI: 10.1016/j.frl.2023.104606
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    6. Hung Manh Pham & Nham Linh Vuong & Dung Viet Tran & Minh Thi Hai Ngo & Trung Tien Le, 2025. "Does environmental, social, and governance disclosure affect financial performance? An empirical study of Southeast and East Asia commercial banks," Asia-Pacific Journal of Regional Science, Springer, vol. 9(1), pages 1-26, March.
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    9. Jiayang Kong & Mark Goh & Yu Cao, 2024. "Can Digital Economy Development Facilitate Corporate ESG Performance?," Sustainability, MDPI, vol. 16(10), pages 1-15, May.
    10. Li, Wenzhen & Zheng, Xiaoyu, 2024. "Key audit matter disclosure and stock mispricing: Evidence from China," Finance Research Letters, Elsevier, vol. 67(PB).
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