Greenwashing and stakeholder theory in China: an empirical evidence of corporate social responsibility and firms performance

Previous research on the relationship between Corporate Social Responsibility (CSR) and corporate sustainability remains ambiguous, with limited exploration of stakeholder influence. This study addresses this gap by analyzing data from 14,206 firm-year observations of Chinese manufacturing companies listed on the Shanghai and Shenzhen exchanges (2010–2019). To this end, 2SLS and PSM-DID methods were applied to address endogeneity concerns and isolate the causal impact of CSR. The findings of this study reveal a positive impact of CSR on both economic and environmental performance. Moreover, internal stakeholders, including major shareholders, domestic and overseas institutional investors, and employees, act as motivators for sustainable performance. However, the results show that institutional investors may hinder environmental progress. External stakeholders, on the other hand, exert diverse influences. While government, creditors, and suppliers enhance CSR’s positive effect on economic performance, government, customers, and peer pressure promote improvements in environmental performance. Notably, internal stakeholders act as primary watchdogs, regulating potential negative behaviors like greenwashing, while external stakeholders tend to overlook them due to stronger emphasis on self-interest. These findings highlight the need for policies that encourage internal stakeholder engagement, address potential conflicts of interest among external stakeholders, and strengthen regulatory frameworks for greenwashing, paving the way for more sustainable corporate practices and improved economic and environmental performance.