Self-restraint or external supervision: Green bond issuance and greenwashing

How green bond issuance affects firms' greenwashing behavior is an important and unexplored topic. We use the data of Chinese green bond issuance and listed firms to investigate the impact of green bond issuance on firms' greenwashing behavior. We find that green bond issuance significantly inhibits firms' greenwashing behavior. The mechanism test results show that green bond issuance inhibits firms' greenwashing behavior by improving information disclosure quality, and the negative impact of green bond issuance on firms' greenwashing behavior by improving information disclosure quality is greater than the positive impact of alleviating financing constraints on firms' greenwashing behavior. The results of heterogeneity analysis show that the negative impact of green bond issuance on greenwashing behavior is more significant for firms located in regions with a higher level of fintech, political connections, and a higher level of digital transformation. Overall, our empirical evidence suggests that inhibiting firms' greenwashing behavior requires external supervision rather than firms' self-restraint.