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HomePaperCorporate Greenwashing, Firm Performance, and CEO Incentives

Corporate Greenwashing, Firm Performance, and CEO Incentives

1 February 2024
Authors: Qiyang He (University of Sydney), Buhui Qiu (University of Sydney), Ben Marshall (Massey University), Justin Nguyen (Edith Cowan University), Nhut Nguyen (Auckland University of Technology) and Nuttawat Visaltanachoti (Massey University)
Presenter: Qiyang He (University of Sydney)
Abstract:

We construct a novel measure of firm-level greenwashing based on a FinBERT machine learning model and earnings conference call transcripts. We show that firms with higher greenwashing have more future environmental incidents, increased EPA enforcement, and no increase in green innovation. The stock price and future operating performance both decline. However, third-party environmental ratings improve. CEOs benefit from increased job security, and lower future pay-for-performance sensitivity and wealth-to-stock-volatility sensitivity. Following greenwashing, managers take less risk with reduced future R&D and acquisition activities, lower leverage, and increased cash holdings. Our results support an agency motivation for corporate greenwashing.

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