N°23-90: Greenwashing: Do Investors, Markets and Boards Really Care?

What are the financial repercussions of corporate greenwashing? To answer this question, we focus on the impact of such ethically flawed practices on corporate stock market performance. We find a broad devaluation, with an average abnormal stock return of -0.63%, indicating investor disapproval of deceptive environmental claims. We further find a shift in investor sentiment in parallel with the growth of social media, underscoring the potential for future swift and extensive reputational damage. National regulatory power is also identified as a determinant of market response intensity. Industries inherently associated with environmental concerns, particularly energy and manufacturing, experienced more pronounced market reactions, pointing to heightened stakeholder scrutiny. Furthermore, nations with robust environmental values and consciousness witnessed intensified market penalties for greenwashing, revealing the interplay of societal values, national rules and investor sentiment.