Greening or greenwashing? Corporate green bonds and stock pricing efficiency in China

Purpose - This paper aims to unveil the greenwashing intention of green bonds issuing in Chinese enterprises through the lens of stock pricing efficiency. Design/methodology/approach - Drawing on data of Chinese listed companies during 2012–2021, this study uses a difference-in-differences method to study how and through what mechanisms issuing green bonds impacts stock pricing efficiency. Findings - Issuing green bonds lowers stock pricing efficiency, verifying the greenwashing intention of green bonds in China. Potential mechanisms underlie the increased investor attention and sentiment resulting from the information disclosures about corporate green and low-carbon development. This greenwashing issue is more pronounced in firms facing lower financing constraints, having stronger relations with the government, and located in highly marketized regions. In the context of uncertainty surrounding economic policies, especially trade policies, issuing green bonds can signal a weakening of the greenwashing effect. Practical implications - The quality of information disclosure should be emphasized to ensure a substantive commitment to environmental responsibility signaled by green bond issuance, thereby mitigating greenwashing concerns. Social implications - Regulators and standard-setters should improve the issuance system for green bonds and promote the sustainable development of the green bond market through formulating unified certification criteria for green bonds and implementing a stringently periodic reporting system. Originality/value - First, to the best of the authors’ knowledge, it is the first study to draw on the quality of information disclosure and the perspective of stock pricing efficiency to identify whether firms issuing green bonds engage in greenwashing. Second, the study uncovers the black-box underlying this greenwashing issue through investor attention and sentiment and examines further the moderating role of economic policy uncertainties.