Theoretical Framework of Greenwashing and empirical evidence from Listed Companies on the U.S. Stock Market

Abstract

"Greenwashing" behaviors are increasingly prevalent in the financial market, where businesses exaggerate their environmental, social and governane (ESG) performance. That leads to erroneous decisions and for consumers and investors, contradicting their expectations towards “green” consumption and investments. The main objective of this study is to systematize theoretical foundations and identify greenwashing behaviors using descriptive statistical methods. Additionally, from a corporate financial and governance perspective, the study aims to clarify the characteristics of businesses that tend to engage in greenwashing through a quantitative analysis based on a sample of 3,149 US listed companies during the period of 2009-2018. The research findings contribute to the limited body of empirical studies on greenwashing, providing an overview of the extent of greenwashing behavior across economic sectors and corporate financial and governance criteria. Furthermore, it highlights the role of legal regulations and corporate governance in preventing greenwashing. These recommendations are valuable for regulatory agencies, corporate managers, and other stakeholders in promoting substantive ESG practices towards the sustainable development.