Abstract Corporate greenwashing is a major obstacle to global sustainable development, creating an urgent need for effective solutions. This study examines how Qualified Foreign Institutional Investors (QFIIs) influence greenwashing using data from Chinese A-share companies between 2009 and 2023. We find that QFII shareholding significantly reduces greenwashing. The result remains robust after controlling for endogeneity and conducting various robustness tests. Further tests reveal that QFII shareholding curbs greenwashing by improving information transparency, enhancing internal control quality, and alleviating financing constraints. The heterogeneity analysis reveals that the inhibitory effect is stronger when public environmental concern is higher, industry competition is more intense, the firm operates in a high-pollution industry, or the magnitude of QFII shareholding is greater. Additionally, we demonstrate that by suppressing greenwashing, QFII shareholding improves both the environmental and economic performance of firms. Our study offers policy implications for foreign ownership reform and greenwashing governance in China and other emerging markets.
Yang et al. (Tue,) studied this question.