The hidden perils of greenwashing: an empirical study on default risk in Chinese a-share listed firms

Abstract

In the context of global climate governance, corporate environmental performance is becoming critical for market competitiveness. However, some enterprises may cultivate false environmental credentials through greenwashing practices, triggering information asymmetry and market trust crises. Using data from Chinese A-share listed companies spanning 2009–2022, this study constructs a proxy for potential greenwashing based on the standardized gap between ESG disclosure scores (Bloomberg) and ESG performance ratings (Huazheng), which captures the divergence between disclosure intensity and external assessment. This disclosure‐rating gap serves as an empirical proxy for the deliberate exaggeration or selective reporting that characterizes greenwashing behavior. Building on this, fixed‐effects models and mediation tests quantitatively deconstruct the 'black box' mechanism through which greenwashing amplifies corporate default risk. The core empirical contribution of this study lies in confirming greenwashing as a significant predictor of corporate debt default, while deeply deconstructing its transmission logic through three channels: market reputation, legal repayment, and stock price volatility. The findings address the evidence gap between environmental performance and hard financial risks, and provide regulators with a comprehensive risk transmission roadmap for implementing differentiated financial oversight during green transitions.