Costs may be a blessing in disguise: Litigation risk and greenwashing

Shawn Qu

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: This study examines how litigation risk affects firms greenwashing, with the help of D&O insurance shock. Using a sample of Chinese listed firms, we find that litigation risk curtails greenwashing, while D&O insurance fosters it by reducing this risk. The moderation analysis reveals that firms with a heightened perception of economic policy uncertainty are likelier to engage in greenwashing when they have D&O insurance. Our results are robust and show that Litigation risk as a disclosure cost could discourage unethical ESG disclosures by firms. This paper provides a new analytical perspective, exploring the impact of litigation risk on ESG greenwashing behavior from the angle of behavioral costs.

Keywords: Greenwash; ESG; D&O insurance; Litigation risk (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324000990

DOI: 10.1016/j.frl.2024.105069

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