The impacts of social credit environment improvement on corporate ESG greenwashing: Evidence from China

Menghan Wang, Yinglin Zhang and Xiaoxiao Gong

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: A robust social credit system serves as a foundational institutional mechanism to strengthen regulatory accountability in environmental, social, and governance (ESG) practices, while mitigating the systemic challenge of ESG-related greenwashing and promoting sustained ecological and socioeconomic progress. Based on the construction of China's social credit system as a quasi-natural experiment, this study examines the impact of an improved social credit environment on corporate ESG greenwashing behavior, utilizing data from Chinese A-share listed companies from 2010 to 2022. The results show that (1) social credit environment improvement has a negative impact on ESG greenwashing; (2) social credit environment improvement can alleviate the financing constraints and reduce agency costs, thereby inhibiting corporate ESG greenwashing; (3) the inhibitory effect of social credit environment improvement on ESG greenwashing is more pronounced in firms with lower analyst coverage, poorer information transparency, and those registered in regions characterized by deficient rule of law enforcement. These results offer valuable policy implications for fostering genuine corporate environmental responsibility and advancing sustainable development.

Keywords: Social credit environment; ESG greenwashing; Financing constraints; Agency costs (search for similar items in EconPapers)
JEL-codes: G30 M14 O20 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025005726

DOI: 10.1016/j.iref.2025.104409

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