Bridging the green gap: How digital financial inclusion affects corporate ESG greenwashing

We examine whether and how the development of digital financial inclusion (DFI) affects firm environmental, social, and governance (ESG) greenwashing. Our findings indicate that local DFI prohibits firms' greenwashing behaviors. These conclusions are supported through robust analysis using a multidimensional fixed-effects model, alternative measures, and an instrumental variable approach. Our research provides compelling evidence that DFI dampens corporate greenwashing by easing financial constraints and reducing information asymmetry. Additionally, DFI promotes genuine corporate engagement in ESG activities, though it does not influence ESG disclosure practices. Notably, the effects are more pronounced in firms with limited analyst coverage and increased government supervision.