How GDP Manipulation by Local Government Affects Corporate Greenwashing in China

Xuanhao Hu, Ziyang Yu, Hong Fan () and Junbin Wan
Additional contact information
Xuanhao Hu: International Business School, Hainan University, Haikou 570228, China
Ziyang Yu: School of International Studies, University of International Business and Economics, Beijing 100029, China
Hong Fan: Sobey School of Business, Saint Mary’s University, Halifax, NS B3H 3C3, Canada
Junbin Wan: Center for Economic Research, Shandong University, Ji’nan 250100, China

Sustainability, 2025, vol. 17, issue 8, 1-23

Abstract: Firms frequently face a tradeoff between the advantages of upholding sustainability and ESG performance and the expenses associated with participating in ESG initiatives. This tension leads to an increase in greenwashing practices, which ultimately undermines genuine sustainability efforts and misleads stakeholders. Motivated by this trend, our study examines the influence of a macro-level factor, specifically local city-level governments’ GDP manipulation, on the extent of firms’ greenwashing, highlighting how government behavior can distort sustainable business practices. Using the data of the publicly traded Chinese manufacturing companies during the period of 2007–2019, we find a positive and significant relationship between the extent to which firms engage in greenwashing and the extent of local city-level governments’ GDP manipulation. Additional analysis reveals that firms’ financial constraints and external monitoring are the channels through which governments influence firms’ greenwashing. In addition, the finding of a positive association between firm greenwashing and government GDP manipulation is more pronounced in regions with a less developed marketization index, in periods before China’s anti-corruption campaign, in state-owned firms, and in firms at the business life cycle of the mature stage. Our study addresses a gap in the literature by demonstrating how government economic interventions influence firms’ sustainability performance.

Keywords: greenwashing; manipulation; financial constraints; anti-corruption campaign (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/8/3540/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/8/3540/ (text/html)

Related works:
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:gam:jsusta:v:17:y:2025:i:8:p:3540-:d:1635084

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().