Catering to climate-conscious investors: Does investor climate concern induce corporate greenwashing?
Jingyi Guan, Jiazhuo Wang, Peixuan ChenPurpose
As climate risks intensify, investors increasingly incorporate climate considerations into capital market decisions, making investor climate concern an important external governance force. However, prior research offers conflicting views on whether such concern disciplines firms toward substantive environmental action or incentivizes symbolic responses such as greenwashing. Existing studies mainly emphasize regulatory pressure or media scrutiny and pay limited attention to investor-driven governance in interactive disclosure settings. Our study aims to examine whether and how investor climate concern induces corporate greenwashing, and to clarify the governance mechanisms and boundary conditions through which investor scrutiny shapes firms' environmental disclosure strategies.
Design/methodology/approach
Using a sample of Chinese A-share listed firms from 2008 to 2022, we investigate the impact of investor climate concern on corporate greenwashing. The primary dataset is drawn from the textual content of question-and-answer sessions at earnings communication conferences, which include discussions on climate change, green development, and environmental disclosure strategies.
Findings
The results show that firms are more likely to engage in greenwashing when the level of investor climate concern is higher, particularly when such concern focuses on pollution control, ecological protection, energy efficiency and low-carbon development. Executive green awareness serves as a mediating factor in this relationship. Further analysis shows that the structural content of investor climate concern, the frequency of investor–management interactions, and the tone of investor questions all significantly influence corporate behavior. Specifically, broader investor concern, more detailed managerial responses, and a more negative tone in investor questioning are each associated with a lower likelihood of greenwashing. The effect of investor climate concern on corporate greenwashing is particularly pronounced among firms in non-heavy-polluting industries, non-asset-intensive firms, firms with higher-quality environmental disclosure, and firms with lower levels of earnings management. Moreover, stronger internal governance mechanisms can effectively suppress greenwashing behavior under the pressure of investor climate concern.
Originality/value
Our study extends the greenwashing literature by introducing investor climate concern as a distinct external governance force shaping firms' environmental disclosure strategies, complementing the existing focus on regulation, media scrutiny, and market discipline. It broadens the investor attention literature by moving beyond asset pricing and market reactions to examine micro-level behavioral consequences for corporate environmental conduct. By leveraging interactive question-and-answer texts from earnings communication conferences, the study offers a novel, real-time measure of investor climate concern, providing a sharper lens through which to capture investor pressure and its governance implications.