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Costs may be a blessing in disguise: Litigation risk and greenwashing

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  • Qu, Shawn

Abstract

This study examines how litigation risk affects firms greenwashing, with the help of D&O insurance shock. Using a sample of Chinese listed firms, we find that litigation risk curtails greenwashing, while D&O insurance fosters it by reducing this risk. The moderation analysis reveals that firms with a heightened perception of economic policy uncertainty are likelier to engage in greenwashing when they have D&O insurance. Our results are robust and show that Litigation risk as a disclosure cost could discourage unethical ESG disclosures by firms. This paper provides a new analytical perspective, exploring the impact of litigation risk on ESG greenwashing behavior from the angle of behavioral costs.

Suggested Citation

  • Qu, Shawn, 2024. "Costs may be a blessing in disguise: Litigation risk and greenwashing," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324000990
    DOI: 10.1016/j.frl.2024.105069
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