The Impact of Institutional Investors’ Shareholding on Green Bond Greenwashing Behavior

Zhirong Xiao

doi:10.54691/4wr17k23

Authors

Zhirong Xiao

DOI:

https://doi.org/10.54691/4wr17k23

Keywords:

Institutional Investors, Shareholding, Green Bonds, Greenwashing, ESG.

Abstract

The scale of China’s green bond market has rapidly expanded in recent years, yet greenwashing practices have emerged, undermining investor trust and posing challenges to financial stability. Existing research has mainly focused on issuers’ characteristics and external audits, but the role of institutional investors in green bond markets remains unexplored. This study investigates the relationship between institutional investors’ shareholding and green bond greenwashing behavior in China’s capital markets. Through theoretical analysis and empirical testing, the author examines the supervisory and governance roles of institutional investors in mitigating greenwashing practices. Utilizing a dataset of 4,023 green bonds issued by A-share listed companies from 2016 to 2023, the findings demonstrate that higher institutional shareholding significantly reduces greenwashing, with long-term investors and those specializing in Environmental, Social, and Governance (ESG) investments exhibiting stronger inhibitory effects. Heterogeneity analysis reveals differential impacts across market environments and firm characteristics, particularly in regions with weaker environmental enforcement and among smaller, high-pollution firms. These results contribute to the design of regulatory frameworks and market-based mechanisms to enhance green bond credibility.

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