Deceptive Tone in Sustainable Supply Chain Disclosure and Its Impact on Firm Performance: The Role of Organizational Structure

This study, building on information processing theory, examines how a deceptive tone related to the sustainable supply chain (SSC) in annual disclosures impacts a firm's financial performance in light of its organizational structure. This study uses a novel firm‐level SSC deceptive score within the annual disclosure of BSE 100 listed firms between 2021–2023, by applying natural language processing and explainable AI, and extracts linguistic cues from SSC narratives. Subsequently, information on financial metrics, organizational structure (business group (BG) vs. independent firms), and ownership structure from the Prowess database was collected. Employing a random‐effects panel data regression to test the proposed hypotheses, this study reports that a higher use of SSC related deceptive tone in disclosures significantly reduces firm performance. This indicates a loss of stakeholder trust and increased interpretive ambiguity due to the use of deceptive tones. More importantly, we find that BG affiliation positively moderates this relationship, indicating that adverse effects are mitigated through group reputation and internal governance mechanisms. However, BG firms exhibited a lower baseline performance suggesting embedded structural inefficiencies. This study integrates a contextual analysis of annual disclosures and panel data modeling to offer empirical evidence on the risks of impression management in SSC disclosures. It contributes to the literature on SSC, greenwashing, and corporate governance by showing how linguistic tone and organizational structure together may shape financial outcomes in a sustainability‐focused business environment.