environmental management

environmental innovation

Finance research letters

• We analyze the link between corporate greenwashing and product market competition (PMC). • When firms’ environmental costs are high, PMC reduces greenwashing practices. • More environmentally damaging firms exhibit more substantive disclosure when faced with higher PMC. • PMC appears to be an effective disciplinary mechanism for achieving economic efficiency through increased disclosure of reliable and material information. This study examines the relationship between corporate greenwashing and product market competition (PMC). Using an unbalanced panel of 324 US firms over the 2005–2015 period, we find that the negative impact of PMC on greenwashing is conditional on the level of environmental costs. Our results suggest that PMC is an effective disciplinary mechanism for achieving economic efficiency – in the case of firms featuring a high level of environmental costs– through an increase in the disclosure of reliable and material information.

Greenwashing and product market competition