Incentive or catering effect of environmental subsidies? Evidence from ESG reports on greenwashing

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-04-08 DOI:10.1016/j.irfa.2025.104242

Guangrui Liu , Ying Fang , Hao Qian , Zhigang Ding , Alex Zhang , Songlin Zhang

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Abstract

This study examines how government environmental subsidies impact firm environmental, social, and governance (ESG) information disclosure by focusing on incentive-driven and catering effects. Using data from Chinese listed companies (2011−2021), we develop an ESG report greenwashing catering index. We show that these subsidies generally promote greenwashing in ESG disclosures, with the catering effect outweighing the incentive effect. This is driven mainly by increased investor sentiment, analyst attention and risk-taking capacity following subsidy receipt. Management's greenwashing is amplified by executives' political connections and is more prevalent in the sample of heavy polluters, state-owned enterprises, firms under strong environmental regulation, firms exhibiting voluntary disclosure and firms with poor ESG performance. Overall, we reveal the catering effect of ESG reporting on greenwashing through government environmental subsidies and introduce a new theoretical perspective on such greenwashing.

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.