Government environmental attention and enterprise greenwashing behavior: evidence from China

Abstract

Purpose: This study investigates whether Chinese local governments’ environmental attention can mitigate corporate “greenwashing”, focusing on the extent of environmental content in annual government work reports as indicative of government environmental attention. This study aims to determine whether enterprises respond to changes in local governmental attention by improving the quality of their environmental information disclosures. Design/methodology/approach: Data from China’s A-share listed companies spanning 2013–2021 were sourced from the CSMAR database and company annual reports. Environmental attention data were manually gathered from local government work reports published on official local government websites by using text analysis methods. These datasets were analyzed empirically to assess the impact of local governments’ environmental attention on corporate greenwashing behavior. Findings: Results show that increased governmental environmental attention significantly reduces corporate greenwashing behavior by alleviating corporate financing constraints, enhancing independent engagement in environmental initiatives and bolstering stakeholder oversight. Moreover, heterogeneity analysis indicates that the influence of government environmental concerns is pronounced in non-state-owned enterprises, firms with subpar audit quality and those exhibiting myopic management tendencies. Originality/value: This study enriches the existing literature on the government–business nexus. It also introduces methodological innovations by employing a lexical analysis of environmental themes in local government work reports instead of using typical event study approaches. Furthermore, it uses a mediating effect model to identify the mechanisms through which government environmental attention influences corporate greenwashing, namely, government subsidies, corporate environmental initiatives and external stakeholder oversight.