Managerial myopia and greenwashing: A machine learning and text analysis approach

Abstract

Although there is fruitful research on the antecedents of greenwashing from the regulatory and normative perspective, the cognitive explanation is underexplored. To fill this gap, we explore the relationship between managerial myopia and greenwashing based on construal level theory. We suggest that myopic managers view greenwashing as psychologically distinct from mentally neglecting the long-term hazard. With the help of Chinese listed firm data from 2010 to 2017, we find evidence to support the positive relationship between managerial myopia and greenwashing. Moreover, we explore the boundary conditions of the proposed relationship. We show that the positive relationship is exacerbated when firms have more short-term institutional investors and attenuated when firms have more long-term institutional investors. Our study completes the greenwashing research by offering a cognitive explanation and advances the upper echelons theory by providing the psychological grounds for managerial myopia.