Customer concentration and corporate greenwashing

This study investigates the effect of customer concentration on corporate greenwashing. Our empirical analysis reveals a positive correlation between customer concentration and greenwashing, driven by reduced corporate transparency and higher agency costs. This effect is stronger in non-state-owned firms, those facing intense market competition, and those in less polluting industries. By contrast, the relationship is weaker for firms with government or state-owned clients, which may demand greater environmental and social accountability. Additionally, firms with concentrated customers are more likely to engage in greenwashing under negative media pressure. However, this correlation weakens in the post-COVID-19 period. Moreover, pressure-sensitive institutional investors encourage such firms to engage in greenwashing, whereas pressure-resistant investors curb this behavior. Lastly, effective internal controls mitigate greenwashing associated with concentrated customers. This research enhances our understanding of factors driving corporate greenwashing behavior and underscores the importance of transparency and stakeholder pressure in curbing it.