A study on the U-shaped relationship between government environmental incentives and corporate greenwashing

Is a higher intensity of environmental incentives always better? Based on resource dependence theory, institutional theory, signaling theory, and moral licensing theory, this paper empirically examines the relationship between government environmental incentives ( GEI ) and corporate greenwashing ( GWS ) using data from Chinese A-share listed companies from 2009 to 2024. The results provide qualified support for a U-shaped association between GEI and GWS , characterized by a robust negative relationship at low-to-moderate GEI levels and a suggestive upturn at high GEI levels. Financing constraints and information transparency provide two distinct and nonlinear explanatory channels. GEI significantly alleviates financing constraints, and the resulting indirect effect on GWS depends on firms’ initial levels of financing constraints. At lower GEI levels, GEI is associated with higher information transparency and lower GWS , whereas a positive indirect effect emerges only in the upper tail of the GEI distribution. Further analysis suggests that executives’ environmental cognition, government environmental attention, and enterprise internal controls significantly flatten the curve and delay the estimated turning point, although the evidence for executives’ environmental cognition is comparatively weak. Heterogeneity analysis indicates that the nonlinear pattern is more pronounced among state-owned enterprises and growth-stage firms. Overall, the findings caution against assuming that increasing GEI intensity will always reduce GWS . This study suggests that policymakers should monitor high-intensity incentive programs more carefully, avoid relying solely on incentive expansion, and combine subsidies with performance verification, fund-use audits, and assessment of substantive environmental outcomes.