Executive pay gap and corporate ESG greenwashing: Evidence from China

With the increasing global influence of ESG, the phenomenon of greenwashing is gradually spreading to the ESG field. Using a sample of Chinese A-share listed companies from 2011 to 2021, we examine the impact of the executive pay gap on corporate ESG greenwashing. The findings suggest that the executive pay gap significantly exacerbates corporate ESG greenwashing. Mechanism analysis shows that the exacerbating effect is achieved by increasing the level of risk-taking. Heterogeneity analysis highlights that the impact of the executive pay gap on corporate ESG greenwashing varies across different internal driving factors and external governance effects. Specifically, this exacerbating effect is more pronounced in firms with low executive environmental awareness, high levels of surplus management and financing constraints, and those subject to lax environmental regulations and low levels of media scrutiny. These findings provide empirical evidence of the negative impact of the executive pay gap on corporate sustainability and offer valuable insights for improving corporate governance structure and regulating corporate ESG greenwashing.