Greenwashing, Female Directors, and Financial Performance in Emerging Asian Banks

Abstract

In Emerging Asia's rapidly evolving banking industry, financial institutions face dual pressures: to contribute to economic development and to address global sustainability expectations in response to climate change. These pressures are further complicated by institutional voids and high information asymmetry in the region, which may increase the risk of greenwashing. Greenwashing refers to a situation in which financial institutions make environmentally responsible statements that do not fully reflect their environmental performance. By applying Legitimacy Theory and Upper Echelons Theory, this paper explores the association between greenwashing and the market valuation of banks and examines whether board gender diversity acts as an internal governance mechanism in this emerging market context. This study employs 751 firm-year observations from 136 commercial banks in Emerging Asia for the period 2015–2024. Feasible Generalized Least Squares is used for heteroskedastic panels and FE-Clustered sensitivity checks address within-banks serial correlation. Further robustness and sensitivity tests are performed using alternative board gender diversity measures and FE-Clustered specification. The results reveal that greenwashing is significantly and negatively associated with Tobin's Q. Moreover, the results suggest that board gender diversity may weaken the negative association between greenwashing and Tobin's Q. According to the marginal effects analysis, the negative association becomes statistically indistinguishable from zero at approximately 20–30% female board representation and turns positive at higher levels of diversity. In addition, the mechanism analysis shows that female board representation is negatively associated with the Greenwashing Index, providing evidence consistent with a monitoring channel. Overall, the findings suggest that board gender diversity may function as a governance-signaling mechanism that strengthens disclosure credibility in Emerging Asian banking markets. Since this study relies on observational panel data, the results should be interpreted as associative rather than causal.