Analysis shows analyst coverage reduces greenwashing in firms with financial constraints, highlighting strong ESG governance effects.
In this study, we analyze data from Chinese-listed firms, spanning the period 2011–2021, to address the question of whether analyst coverage reduces environmental, social, and governance (ESG) greenwashing. The results indicated that analysts act as an external governance mechanism that significantly restrains corporate ESG greenwashing. This effect operates through enhanced information transparency and strengthened monitoring. Furthermore, institutional ownership and media attention serve as moderators in this relationship, revealing a substitution effect between different governance mechanisms. Moreover, further analysis into heterogeneous effects uncovers that the effects are markedly stronger in firms with higher financial constraints and that belong to polluting and highly competitive industries. Our findings underscore the unique governance role of financial analysts in mitigating ESG misconduct and advancing corporate sustainability in emerging markets.
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Zhang et al. (2025) studied this question.
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