The Practice of Green Washing Motivated by Financial Constraints: An Analysis in Global Economies

Abstract

Objective: The aim of this study is to analyze if the practice of Greenwashing is related to the level of financial constraints of companies in the capital market.   Theoretical Framework: This section presents the main concepts and theories that underpin the research. Relevant theories, models, or frameworks are highlighted, providing a solid foundation for understanding the research context.   Method: To achieve this objective, this research proposes an econometric model that seeks to relate variables representing financial constraint conditions to the Greenwash score. For this purpose, financial data from 3,574 companies from 21 countries were analyzed for the period between 2016 and 2022. The proposed model in the research was analyzed through multiple linear regression with panel data.   Results and Discussion: The results obtained allow inferring that the variables used to capture the level of financial constraint of companies are significantly related to the practice of Greenwashing. However, the Financial Risk and Debt Cost variables were negatively associated with the Greenwash score, showing a relationship with the dependent variable diverging from what was expected.   Research Implications: The results of this research allow inferring for the analyzed sample that the practice of Greenwashing is impacted by the financial constraint situation of companies. Such a result can contribute to academic studies on best ESG practices and provide support for improving market monitoring regarding the manipulation of Corporate Social Responsibility actions by companies.   Originality/Value: This study contributes to the literature by expanding the analysis of Greenwashing practice to a significant and representative sample of companies in relation to the largest global economies. The relevance and value of this research are evidenced by evaluating aspects of corporate management beyond financial ones, relating environmental and social aspects to the financial risks of companies in the capital market.