Does Corporate Tax Avoidance Encourage Greenwashing?

Corporate greenwashing has become a growing concern because it may weaken policy incentives for real emissions reductions and environmental investment. However, it remains unclear whether firms’ financial strategies influence their environmental communication strategies. This paper shows that corporate tax avoidance significantly increases corporate greenwashing, with the effect primarily reflecting symbolic environmental communication rather than improvements in substantive environmental practices. Mechanism tests indicate that tax avoidance facilitates greenwashing by increasing information asymmetry and appointing managers with environmental backgrounds. Further analyses reveal that this effect is more pronounced among firms with higher pre-event levels of greenwashing. Moreover, tax avoidance does not improve substantive environmental performance, providing no evidence for the alternative explanation that tax avoidance reduces greenwashing by increasing internal resources available for environmental investment. These findings provide implications for environmental governance, ESG disclosure regulation, and corporate sustainability management.