Greenwashing and firm performance in an emerging market: Short-term gains vs long-term risks

Amid increasing institutional pressure to demonstrate environmental responsibility, many firms have adopted sustainability-related communications without concrete actions, which can lead to perceived greenwashing. Taking into account this situation, this study extends the literature on greenwashing and neo-institutional theory by developing and testing a comprehensive model that examines both the antecedents and consequences of corporate greenwashing behavior in an emerging market. This study examines key antecedents of perceived greenwashing, namely: environmental attitude, environmental knowledge, stakeholder pressures and information asymmetry, as well as the implications for firms' performance. Survey data from 268 managers of Kompas100-listed firms on the Stock Exchange of Indonesia were analyzed using partial least squares path modeling (PLS-PM). The results show that environmental attitude and knowledge reduce perceived greenwashing, while stakeholder pressures and information asymmetry increase its likelihood. Notably, perceived greenwashing positively affects economic, environmental, and social performance in the short term. This study emphasizes the importance of highlighting the contextual setting of the research because emerging markets have institutional differences compared with developed economies.