The effect of institutional investors’ site visits on corporate greenwashing behavior

Abstract

This study investigates whether and how institutional investors' site visits affect corporate greenwashing behavior. Using a sample of Chinese A-share listed companies from 2012 to 2022, the results find that institutional investors' site visits significantly inhibits corporate greenwashing behavior. This relationship holds after a series of robustness tests. Mechanism analysis reveals that institutional investors' site visits generate information and force effects, which can inhibit corporate greenwashing by reducing information asymmetry, increasing the external media attention, and heightening internal reputational pressure. Further analyses show that informal social monitoring mechanisms crowd out the impact of institutional investors’ site visits on corporate greenwashing behavior. Additionally, public environmental concerns negatively moderate the relationship between them. Heterogeneity analysis indicates that the relationship is more pronounced in firms with higher institutional investor shareholdings.

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