State shareholding in privately-owned firms and greenwashing: Evidence from China

It remains unclear whether state shareholding (SS) truly enhances firms' fulfillment of their corporate social responsibility (CSR) or merely motivates them to strategically release "enhanced" CSR reports. Utilizing the reform that permits SS to participate in privately-owned enterprises (POEs) in China, we find that the participation of SS enhances POEs' access to resources and alleviates their needs for legitimacy, leading to disparities in CSR disclosure and substantive CSR activities for POEs, consistent with the notion of greenwashing. Additional tests show that greenwashing behavior is particularly pronounced in the presence of large state-owned shareholders and when CSR disclosure is compulsory.