Greenwashing behavior and firm value – From the perspective of board characteristics

Abstract With increasing environmental pressures on companies, they are beginning to disclose corporate social responsibility reports actively. However, some studies point to greenwashing in corporate social reporting as a cause for concern. Our study aims to uncover the board's role in the relationship between greenwashing and firm value. Using a two‐way fixed effects model and a series of robustness tests, our findings suggest that greenwashing increases firm value. We introduce board diversity to answer the question of who is driving greenwashing behavior. Female directors, age diversity, educational background, and shareholder aggregation inhibit greenwashing behavior, while local directors and political connections promote this effect. Greenwashing increases firm value by improving the quality of disclosure, stakeholder concerns and alleviating financing constraints. Finally, greenwashing has greater economic performance for heavily polluting firms, firms audited by the Big 4 and firms with mandatory disclosure. This study provides rich empirical findings for boards and greenwashing behavior, offering novel theoretical insights to promote substantive CSR and board governance in developing countries such as China.