All That Glitters Is Not Gold : Performance Impact of Corporate Greenwashing

This paper examines the impact of greenwashing in corporate communication on the operating performance of firms under consideration of stakeholder demand for CSR based on an inter-national sample. Besides providing a new approach for measuring greenwashing by applying textual analysis on corporate claims, we find that greenwashing significantly reduces firms’ operating return on assets, especially if respective stakeholder pressure is high. On the other hand, greenwashing leads to short-term increases of firms’ market value, which, however, turn negative in the long run, hinting at investors reacting in the short run to expected stakeholder behavior rather than CSR communication itself. Furthermore, the disclosure of dedicated CSR reports appears to be crucial in detecting greenwashing. The presented results are moreover robust to different methodological specifications as well as alternative sample and variable constructions