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Financial distress and corporate ESG greenwashing

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  • Li, Ruiqian
  • Che, Chang
  • Huang, Tong

Abstract

Understanding the drivers of greenwashing is crucial for promoting genuine sustainability practices. This study uses data from A-share listed companies between 2009 and 2022, applying resource dependence theory to examine whether and how financial distress affect environmental, social, and governance (ESG) greenwashing. Our findings indicate that financial distress prompts companies to engage in ESG greenwashing. Mechanism analysis shows that financial distress encourages companies to adopt ESG greenwashing by reducing green innovation and harming corporate reputation. Heterogeneity analysis shows that this promoting effect is stronger in companies with high customer concentration, significant media pressure, and intense industry competition. Additionally, ESG greenwashing induced by financial distress leads to a range of economic consequences, including reduced debt financing scale, misallocation of government environmental subsidies, and decreased analyst earnings forecast accuracy. This study enhances the literature on ESG greenwashing drivers by providing fresh perspectives on how financial distress influences corporate sustainability practices.

Suggested Citation

  • Li, Ruiqian & Che, Chang & Huang, Tong, 2026. "Financial distress and corporate ESG greenwashing," International Review of Economics & Finance, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:reveco:v:106:y:2026:i:c:s1059056026000511
    DOI: 10.1016/j.iref.2026.104938
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