The Agency of Greenwashing

Abstract

As climate change increasingly challenges business models, the disclosure of firm environmental performance casts growing attention by corporate stakeholders. This creates wider opportunities and incentives for greenwash behaviours. We propose a novel measure of greenwashing and investigate its determinants and consequences for US firms. We find that companies with larger boards are less prone to greenwashing. Board independence is positively associated with greenwash behaviours, while the percentage of women in the board has no detectable impact. Finally, we show that greenwashing reduces firm value.

Keywords: ESG, Climate Change, Carbon Footprint, Greenwashing, Agency Theory

JEL Classification: G32, M14, Q56