Digital Washing under Conflicting Institutional Logics: Evidence from China

Tami Dinh, Florian Eugster, Zhongze Li, Yuchen Wu and Yi Zhang
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Tami Dinh: University of St. Gallen, Institute of Accounting, Control, Auditing
Florian Eugster: University of St. Gallen - Institute of Accounting, Control and Auditing; Swiss Finance Institute
Zhongze Li: Nanjing Audit University
Yuchen Wu: University of St. Gallen
Yi Zhang: University of St. Gallen (HSG)

No 25-49, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This study examines how employee pressure influences digital washing—when firms exaggerate their digital transformation in public disclosures without matching substantive, actual actions. Using data on Chinese listed firms from 2008 to 2021, we measure digital washing as the gap between digital-related keywords in annual reports and digital-related intangible assets. Results show that firms facing higher employee pressure are more likely to engage in digital washing. This effect is more pronounced in state-owned firms, labor-intensive firms, and firms in less market-oriented regions. A Difference-in-Differences analysis using the 2017 U.S.-China trade war supports our findings. Moreover, the consequences test shows that digital washing is associated with increased stock liquidity, indicating a favorable market response to digital washing. Overall, the findings highlight how firms facing conflicting institutional logics—pressures to modernize through digital transformation while maintaining employment—may engage in digital washing as a response.

Keywords: Digital Washing; Institutional Logics; Digital Transformation; Employee pressure (search for similar items in EconPapers)
JEL-codes: D22 D23 L20 M14 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2025-05
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