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Using empirical data from the Chinese capital market, this study demonstrates that analyst coverage mitigates firms' greenwashing behavior. However, the severity of greenwashing increases with a higher proportion of star analysts in the coverage. Heterogeneity analysis reveals that analyst coverage is particularly effective in reducing greenwashing in non-heavily polluting industries. Mechanism analysis indicates that this mitigating effect is achieved by enhancing corporate disclosure transparency and internal control effectiveness, thereby inhibiting greenwashing.
Wang et al. (Wed,) studied this question.