Sustainability or Greenwashing: Evidence from the Asset Market for Industrial Pollution

72 Pages Posted: 18 May 2022 Last revised: 13 Apr 2023

See all articles by Ran Duchin

Ran Duchin

Boston College - Carroll School of Management

Janet Gao

McDonough School of Business

Qiping Xu

University of Illinois Urbana Champaign

Date Written: April 28, 2022

Abstract

We study the asset market for pollutive plants. Firms divest pollutive plants following environmental risk incidents. However, pollution levels do not decline after divesting. The buyers are firms facing weaker environmental pressures, with supply chain relationships or joint ventures with the sellers. The sellers highlight their sustainable policies in subsequent conference calls, earn higher returns as they sell more pollutive plants, and benefit from higher ESG ratings and lower compliance costs. Overall, the asset market allows firms to redraw their boundaries in a manner perceived as environmentally friendly without real consequences for pollution levels and with substantial gains from trade.

Keywords: Divestiture, ESG, pollution, greenwashing

JEL Classification: G32, G34, H57, K42, Q50

Suggested Citation

Duchin, Ran and Gao, Janet and Xu, Qiping, Sustainability or Greenwashing: Evidence from the Asset Market for Industrial Pollution (April 28, 2022). Available at SSRN: https://ssrn.com/abstract=4095885 or http://dx.doi.org/10.2139/ssrn.4095885

Ran Duchin

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Janet Gao (Contact Author)

McDonough School of Business ( email )

Washington, DC 20057
United States

Qiping Xu

University of Illinois Urbana Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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