“Fidelity” or “exploitation”: Social trust and corporate greenwashing

Abstract

As culture plays an important role in corporate decisions, this paper examines whether and how social trust affects corporate greenwashing. Using data from China's A-share listed heavily polluting companies over the period of 2010–2022, we find that regional social trust positively affects corporate greenwashing, indicating the presence of Trust Exploitation. The effect is more pronounced among non-state-owned firms, firms in the eastern region, and firms with a weak competitive market position and high financial risk. Furthermore, mechanism tests show that social trust weakens internal and external monitoring, reduces information transparency, reinforces managerial short-sightedness, and raises the proportion of male executives, through which corporate greenwashing is affected. This study adds to the literature on the determinants of corporate greenwashing from the perspective of informal institutions and enriches the literature on the negative economic consequences of social trust.