Impact of "environmental disclosure greenwashing": a study from the perspective of heterogeneous environmental policies

Environmental disclosure is vital for demonstrating a corporate's environmental initiatives and enabling external stakeholders to access relevant information effectively. However, the lack of a standardized disclosure framework and effective regulations creates an incentive for corporates to exaggerate their environmental disclosures in order to reap the benefits of environmental policies. This study focuses on the disparity between corporate environmental disclosures and actual environmental actions, employing moral hazard and strategic behavior as lenses to investigate whether corporates can exploit "environmental disclosure greenwashing" (EDG) to gain advantages from environmental policies. The findings indicate that, on the whole, corporates implementing EDG indeed receive more environmental subsidies, but this practice also entails the risk of higher pollution charges to offset the environmental non-compliance resulting from EDG activities. The empirical results show some differences in the samples that distinguish the degree of pollution of the corporates. Moreover, we explore the governance effects of internal controls, market quality, institutional investors, and media coverage on corporates' EDG. The conclusions not only lay down a solid theoretical framework for assessing the credibility of corporate environmental reports but also deliver strategic insights aimed at bolstering the implementation of environmental policies and enhancing frameworks that support transparent environmental reporting.