Managerial decision horizon and corporate greenwashing: Evidence from China

Abstract

Corporate greenwashing, a significant manifestation of the decoupling of corporate social responsibility, has attracted considerable attention from stakeholders. Based on the internal governance theory, this study examines listed Chinese companies from 2011 to 2021 to assess the effects of managerial decision horizons on corporate greenwashing behaviours. Our finding shows that a shorter managerial decision horizon exacerbates corporate greenwashing. The robustness of the result has been verified by employing various methods, including the use of instrumental variables, the two-stage Heckman model and alternative variable substitution. Additionally, the study reveals the mechanisms underlying this phenomenon and identifies reduced environmental investment as one of the channels through which myopic managerial decision-making enhances corporate greenwashing. The results also indicate that financial constraints on firms intensify the impact of managerial myopia on greenwashing, whereas the proportion of female executives and investors' site visits mitigate this effect. This study presents important implications for stakeholders governing corporate greenwashing by elucidating the relationship between managerial decision horizons and greenwashing.