Whether corporate strategic Environmental, Social, and Governance (ESG) disclosure can be effectively screened by external markets still needs more empirical support. Despite numerous studies confirming the positive impact of ESG, the issue of strategic ESG disclosure has yet to receive sufficient attention. This study examines the impact of ESG greenwashing on the cost of debt financing and stock returns using panel data of Chinese A-share listed corporates from 2012 to 2021. The study finds that external markets fail to recognize ESG (...) greenwashing in the short term, leading to a temporary reduction in the cost of debt financing and an increase in stock returns, but these effects are not lasting. Mechanism analysis shows that ESG greenwashing enhances corporate reputation and reduces the cost of debt financing through the reputation effect, stimulates investor sentiment, and improves stock returns through the sentiment effect. The study identifies management myopia, excessive power, financial distress, and information asymmetry as the main drivers. However, strong oversight by independent directors, involvement of Big Four audit firms, investor site visits, and high industry competition can mitigate these misleading effects. This research expands the understanding of the causes and economic consequences of corporate ESG greenwashing and provides empirical evidence for managing this phenomenon. (shrink)

With the ongoing development of ecological civilization and advancing state governance, governments focus increasingly on environmental issues to foster low-carbon development. We define government environmental attention (GEA) by aggregating and analyzing textual data extracted from government work reports from 2008 to 2020, using web scraping and expanding the environmental vocabulary with the Word2Vec model. This study examines the impact of GEA on corporate environmental performance (CEP), using datasets from A-share listed corporations in Shanghai and Shenzhen. Our findings reveal a significant (...) positive relationship between GEA and CEP, which remains robust after addressing endogeneity concerns and conducting various sensitivity tests. Mechanistic analysis indicates that GEA enhances CEP by strengthening environmental penalties, directing financial resources toward less polluting firms, and raising managerial green awareness. Heterogeneity analysis suggests that GEA's positive effects on CEP are more pronounced in cities with extensive digital government procurement. Further analysis shows that the capital market responds positively to GEA, enhancing stock liquidity, institutional investor holdings, long-term investor holdings, stock returns, and overall firm value. These findings provide critical insights for policymakers to foster sustainable corporate practices and long-term development. (shrink)