Abstract
This study investigates the role of Artificial Intelligence (AI) capabilities in influencing firms' greenwashing behaviors. We find a robust negative association between firms' AI capabilities and unrepresentative environmental disclosure. An instrumental variable approach is employed to establish causality. The effects are more pronounced for firms (1) with a greater exposure to regulatory climate risk, (2) managed by Republican-leaning managers, (3) with stronger governance structures, (4) possessing greater product market pricing power, (5) operating in multiple regions, and (6) with CEOs with higher pay-for-performance sensitivity. We further demonstrate that AI capabilities aid firms in transitioning to green operations through engaging in green and clean innovation. Finally, we find that AI capabilities correlate with lower greenhouse gas emissions. Overall, our findings shed light on the real impact of AI-related technologies in the energy industry.
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