Effects of Corporate Greenwashing on Firm Value in China

In response to rising public expectations for corporate environmental sustainability, instances of greenwashing have emerged as firms seek to alleviate regulatory pressure and mitigate reputational risks. This study examines the nonlinear economic consequences of corporate greenwashing by analyzing panel data from A‐share listed firms in China between 2009 and 2023. The results reveal an inverted U‐shaped relationship between greenwashing and firm value: Moderate levels of greenwashing enhance firm value, but exceeding a critical threshold leads to a detrimental backfire effect. Heterogeneity analyses further demonstrate that the nonlinear relationship is especially pronounced among nonstate‐owned enterprises, as well as firms operating under weak monitoring, in highly competitive markets, and within low‐pollution industries. These findings enrich the existing literature on corporate social responsibility and firm value, offering critical insights for firms striving to balance environmental responsibility with reputation management.