Greenwashing and investor reactions: The limits of market discipline in developed markets

What are the financial repercussions of corporate greenwashing? We examine stock-market reactions to greenwashing incidents across thirteen developed equity markets between 2007 and 2025, using an EGARCH-based event-study framework verified against market-model and constant-mean benchmarks, firm-matched placebo dates, and cross-sectional regressions with year, country, and industry fixed effects. We find no evidence of a short-run market penalty. Strictly post-disclosure cumulative abnormal returns lie between −0.01% and −0.08%, are statistically indistinguishable from zero, and the estimated penalty is bounded below 0.20% at the ten-day horizon. Windows that straddle the recorded date carry a small positive differential, ＋0.28% over [ − 5 , + 5 ] , which is concentrated in the tails of the event-level distribution, absent from the median, and not robust to the winsorisation cut-off; we therefore do not interpret it as a valuation effect. The results indicate that equity markets did not discipline greenwashing in these markets over the sample period, strengthening the case for regulatory rather than market-based deterrence.