The disciplinary impact of capital market internationalization on corporate ESG greenwashing: A study of A-shares' inclusion in the MSCI index

In the context of high-quality global development, ESG principles have become crucial for enhancing corporate competitiveness and fulfilling social responsibility. However, the prevalence of greenwashing has not only weakened market trust in ESG practices but also raised concerns about corporate ethical responsibility. This study investigated whether the capital market internationalization could impose a disciplinary effect on corporate ESG greenwashing, using the inclusion of China's A-shares in the MSCI Emerging Markets Index in 2018 as an exogenous event and applying a multi-period difference-in-differences model. The findings indicated that capital market internationalization significantly reduced ESG greenwashing, particularly in the dimensions of environmental and corporate governance. Mechanistic analysis revealed that internationalization alleviated financing constraints and strengthened external oversight, prompting firms to adopt higher ethical standards and improve transparency in information disclosure. The heterogeneity analysis further demonstrated that this disciplinary effect was more pronounced for non-high‑carbon firms, companies with institutional investors, firms audited by Big Four accounting firms, and businesses located in more open regions. This study offers valuable insights into how capital market internationalization fosters ethical corporate behavior and mitigates ESG greenwashing.