Industry Tournament Incentives and Corporate Greenwashing Innovation

More empirical evidence is needed to determine whether executives will engage in unethical greenwashing innovation because of industry tournament incentives. We extend the tournament theory from inside the firm to outside by considering the pay gap between the CEO of a firm and the top payments in the same industry. Based on green innovation information disclosed in the annual reports of China A-share listed firms from 2012 to 2022, we provide empirical evidence that industry tournament incentives induce greenwashing innovation. We also demonstrate that firm executives' internal strengthening of R&D manipulation and external reduction of information transparency are two channels for greenwashing innovation induced by industry tournament incentives. In addition, controlling for firm and CEO characteristics reveals that firms with higher career development expectations of CEOs, firms with CEOs having innovation-based professional backgrounds, non-heavy polluting firms and non-high-tech firms, are more prone to industry tournament incentivizing of greenwashing innovation. Our research both enriches research on the manifestations of green innovation and explores the negative experience of tournament theory, which is instructive for understanding gaps in executive pay and corporate greenwashing innovation.