Greenwashing and corporate market power

Abstract

Substantial engagement in social and environmental responsibility, aimed at reducing greenwashing, is a key driver for corporations to strengthen their market power and achieve sustainable development. This study empirically tested the effect of greenwashing on corporate market power using a sample of A-share-listed companies in China’s capital market from 2009 to 2021. The following results were obtained: (1) Greenwashing significantly reduces corporate market power, a finding confirmed through a series of robustness tests; (2) Mechanistic tests revealed that greenwashing weakens corporate market power by diminishing operational and marketing channel control capabilities; and (3) Heterogeneity analysis indicated that environmental regulations exacerbate the negative effect of greenwashing on corporate market power, while stronger internal controls mitigate this effect. This study examines the economic consequences of greenwashing from a product market perspective. The findings offer insights into factors affecting corporate market power, as well as solutions and policies for addressing corporate greenwashing.