Greening by digitization? Exploring the effect of enterprise digital transformation on greenwashing

Abstract Greenwashing has become an important strategy for enterprises to cope with the intense pressure on environmental sustainability and to gain environmental legitimacy. Digital transformation has an important impact on enterprise decision‐making and environmental management. Based on panel data of Chinese A‐share listed enterprises from 2011 to 2021, we empirically examine the relationship between digital transformation and greenwashing using a fixed‐effects model. The results show that enterprise digital transformation can significantly inhibit greenwashing behavior. Second, the impact of enterprise digital transformation on greenwashing exhibits heterogeneous effects at the regional, industry, and firm levels. Furthermore, enterprise digital transformation suppresses greenwashing by alleviating financing constraints, improving information transparency, and enhancing internal control. In addition, we also find that there is an effective boundary to the impact of digital transformation on greenwashing. Specifically, digital transformation exerts a mitigating impact on enterprise greenwashing when the digital transformation level is lower than 10.2163 or higher than 15.7763. Our findings provide references for managers and policy makers to understand digital transformation and its impact on greenwashing.