Does social responsibility reform curb corporate greenwashing: Evidence from a quasi-natural experiment in China

Abstract

Greenwashing has significantly impeded the advancement of environmental, social, and governance (ESG) practices and undermined the sustainable finance. To better fulfill the social responsibility of corporations, the Chinese government spearheaded reforms among state-owned enterprises in 2016. Using data of China's A-share listed companies from 2011 to 2021, this study uses a difference-in-differences (DID) model to investigate the effects of the social responsibility reform on corporate greenwashing. We find that social responsibility reform significantly restrains corporate greenwashing, and this effect is heterogeneous by firm characteristics. The mechanism analysis indicates that the improvement of firms' environmental performance disclosure behavior and the moderation of external regulatory pressure from the CSRC are important channels for restricting corporate greenwashing. Overall, our findings provide new insights into reducing corporate greenwash behavior and offer microscopic evidence for the objective evaluation of the effects of China's social responsibility reform.