Public attention and “Environmental Disclosure Greenwashing”: pressure from oversight or incentive from legitimacy

Abstract

Purpose

This study aims to investigate whether public attention influences corporate decisions on environmental disclosure, thereby revealing how society perceives and understands environmental issues and how corporations respond to these expectations.

Design/methodology/approach

We selected publicly listed Chinese firms as our sample. An “Environmental Disclosure Greenwashing” (EDG) Index was developed through textual analysis of their annual reports using natural language processing. Financial data were obtained from the CSMAR database, and multivariate regression was used for analysis.

Findings

The impact of public attention on EDG primarily manifests as an oversight pressure effect rather than a legitimacy incentive effect. As public attention intensifies, firms tend to adopt more substantial environmental actions instead of merely symbolic environmental disclosures. Formal regulatory frameworks might inadvertently trigger corporate EDG, but public attention can correct the adverse effects possibly introduced by formal regulations. Notably, in firms facing lower institutional pressure, the influence of public attention is more pronounced.

Practical implications

The evidence suggests that public attention reduces corporate EDG. These findings have significant implications for the regulation of environmental disclosures among firms in emerging economies.

Originality/value

The study integrates research in environmental disclosure with the concept of “greenwashing”, unveiling the limitations of the “disclosure as governance” viewpoint. It elucidates the impact of an informal external oversight mechanism (i.e. public attention) on complex corporate environmental disclosure decisions.

Citation

Zhou, Y. and Chen, L. (2024), "Public attention and “Environmental Disclosure Greenwashing”: pressure from oversight or incentive from legitimacy", China Finance Review International, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CFRI-02-2024-0079