Greenwash: Corporate Environmental Disclosure under Threat of Audit

Thomas Lyon () and John Maxwell

Journal of Economics & Management Strategy, 2011, vol. 20, issue 1, 3-41

Abstract: We develop an economic model of “greenwash,” in which a firm strategically discloses environmental information and an activist may audit and penalize the firm for disclosing positive but not negative aspects of its environmental profile. We fully characterize the model's equilibria, and derive a variety of predictions about disclosure behavior. We rationalize conflicting results in the empirical literature, finding a nonmonotonic relationship between a firm's expected environmental performance and its environmental disclosures. Greater activist pressure deters greenwash, but induces some firms to disclose less about their environmental performance. Environmental management systems discourage firms with poor expected environmental performance from greenwashing, which may justify public policies encouraging firms to adopt them.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (337)

Downloads: (external link)
https://doi.org/10.1111/j.1530-9134.2010.00282.x

Related works:
Working Paper: Greenwash: Corporate Environmental Disclosure under Threat of Audit (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:20:y:2011:i:1:p:3-41

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().