The Coexistence of Multiple Large Shareholders and Greenwashing in Environmental, Social, and Governance Disclosures: Evidence From China

Abstract

Research Question/Issue: ESG greenwashing carries significant risks and negative consequences. From a shareholding structure perspective, this paper tries to test the relationship between the coexistence of multiple large shareholders and ESG greenwashing. Research Findings/Insights: We find that multiple large shareholders are associated with ESG greenwashing. On the one hand, multiple large shareholders can lead to the short-termism of firms' management, which boosts ESG greenwashing. On the other hand, multiple large shareholders cause the increased agency problems of firms, which also leads to ESG greenwashing. Furthermore, we find that the promoting effect is more apparent among nonhighly polluting firms and firms that are not audited by Big 4 accounting firms. Theoretical/Academic Implications: At the level of firms' equity structure, this paper enriches the study of the antecedents and influences of ESG greenwashing. That is, the coexistence of multiple large shareholders of a firm may boost ESG greenwashing. Besides, there are different voices in the academic community about the multiple large shareholders, and this paper expands the shareholder studies in corporate governance theory. Practitioner/Policy Implications: This paper proposes that the introduction of multiple large shareholders may produce side effects of ESG governance, and collusion among shareholders to greenwash needs to be guarded against. Therefore, the related authorities may need to set up a more stringent ESG audit process.