Exploring the power of informal institutions: How does social trust affect corporate's greenwashing strategy

Abstract

Corporate greenwashing seriously impedes global sustainable development. Despite the discussion on the factors influencing corporate greenwashing strategy, the impact of informal institutions, particularly social trust, remains underexplored. Based on institutional theory and the attention‐based view, this study examines the effect of social trust on corporate greenwashing strategy. Additionally, it also explores the mediating roles of managers' environmental attention and firms' green open innovation, as well as the moderating roles of government environmental regulation and market competition. Using a sample of 3,143 heavily polluting companies listed on China's A‐share market, the results show that social trust negatively impacts corporate greenwashing strategy. Managers' environmental attention and firms' green open innovation are the chain mediators through which social trust constrains firms' greenwashing strategy. Moreover, government environmental regulation strengthens the effect of social trust on corporate greenwashing, while market competition weakens the effect. The obtained conclusions provide an important guidance for curbing corporate greenwashing strategy and highlight the role of social trust.