Greening through centralization of environmental monitoring?

Abstract

This paper investigates the impact of China's environmental monitoring centralization on firms' greenwashing practices, by examining the causal relationship between environmental governance at the local level and effective environmental regulations for sustainable growth. Using a difference-in-difference (DID) model, we analyze data from Chinese-listed firms over a period spanning from 2010 to 2019. Our results show that environmental monitoring centralization can significantly reduce greenwashing practices, particularly in cases where there is a high level of environmental decentralization. Furthermore, we find that privately-owned firms with high levels of pollution and technology intensity are particularly motivated to reduce greenwashing practices as environmental decentralization levels increase due to the centralization of environmental monitoring policies. Finally, our study reveals that the centralization of environmental monitoring policy shock can effectively curb greenwashing practices by strengthening environmental regulation levels. These findings provide valuable insights for policymakers seeking to promote sustainable growth through effective environmental regulations.