Governance or collusion? Shareholders' network and corporate ESG greenwashing

This study examines the impact of shareholders' network on Environmental, Social, and Governance (ESG) greenwashing in China's A-share market. Against the backdrop of rapid ESG adoption, greenwashing remains a critical concern of investors identifying it as a primary risk. By analyzing data from A-share listed companies between 2009 and 2022, we find that firms embedded in central positions within shareholders' network exhibit higher levels of ESG greenwashing. Mechanism tests reveal that such networks exacerbate greenwashing through strategic information disclosure, director appointments, and anti-competitive coalitions. Heterogeneity analysis shows that networks dominated by pressure-sensitive institutional investors and general corporate shareholders are particularly prone to facilitating greenwashing, especially in firms with high business risk or short-term investment horizon. Our findings highlight the dual-edged role of shareholders' network, emphasizing their collusion effects over governance benefits. This research contributes to the literature on ESG misconduct and offers policy insights for regulating relational equity structures in emerging markets.