Greenwash: Corporate Environmental Disclosure under Threat of Audit

We develop an economic model of “greenwash,” in which a firm strategically discloses environmental information and an activist may audit and penalize the firm for disclosing positive but not negative aspects of its environmental profile. We fully characterize the model's equilibria, and derive...

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Veröffentlicht in:	Journal of economics & management strategy 2011-03, Vol.20 (1), p.3-41
Hauptverfasser:	Lyon, Thomas P., Maxwell, John W.
Format:	Artikel
Sprache:	eng
Schlagworte:	Activism Activists Auditing Business accounting Disclosure Economic models Economic performance Environment Environmental accounting Environmental policy Information dissemination Modelling Strategic behaviour Studies
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container_title	Journal of economics & management strategy
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creator	Lyon, Thomas P. Maxwell, John W.
description	We develop an economic model of “greenwash,” in which a firm strategically discloses environmental information and an activist may audit and penalize the firm for disclosing positive but not negative aspects of its environmental profile. We fully characterize the model's equilibria, and derive a variety of predictions about disclosure behavior. We rationalize conflicting results in the empirical literature, finding a nonmonotonic relationship between a firm's expected environmental performance and its environmental disclosures. Greater activist pressure deters greenwash, but induces some firms to disclose less about their environmental performance. Environmental management systems discourage firms with poor expected environmental performance from greenwashing, which may justify public policies encouraging firms to adopt them.
doi_str_mv	10.1111/j.1530-9134.2010.00282.x
format	Article
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subjects	Activism Activists Auditing Business accounting Disclosure Economic models Economic performance Environment Environmental accounting Environmental policy Information dissemination Modelling Strategic behaviour Studies
title	Greenwash: Corporate Environmental Disclosure under Threat of Audit
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