ABSTRACT
Given historically lax ESG regulation, management has substantial discretion over whether/how to disclose ESG goals or commitments. As stakeholders question the reliability of corporate ESG disclosures, regulators have proposed and begun to implement ESG reporting mandates. Using an experiment, we examine how investors’ perceptions of greenwashing change when an ESG outcome is disclosed after different types of ESG goals were issued in both voluntary and mandatory regulatory reporting regimes. Although challenging quantitative ESG goals are encouraged to incent more ESG activity, we first document that investors’ perceptions of greenwashing increase when a company misses a quantitative goal, but they decrease when a company beats a quantitative goal or issues a qualitative goal, even when corporate ESG outcomes are identical in all cases. Mandates further exacerbate changes in investors’ greenwashing perceptions by magnifying the positive and negative effects of quantitative ESG goals, which in turn, drives changes in investment willingness.
Data Availability: Data are available from the authors upon request.
