[SILS Faculty Seminar] The Impact of Shareholding Concentration on ESG Washing: The Monitoring Role of Leverage Pressure

This research investigates the influence of shareholding concentration on ESG washing and examines the moderating effect of financial leverage. This study focuses on listed companies in China from 2012 to 2022. ESG washing is defined as the gap between a firm’s ESG disclosure score and ESG performance score. Firm-level data were obtained from Bloomberg, Thomson Reuters Eikon, and the China Stock Market and Accounting Research (CSMAR) database. Regression analysis results indicate that firms with highly concentrated ownership are more likely to deviate from genuine ESG practices, suggesting that dominant shareholders may use ESG reports as “window dressing”. However, leverage pressure appears to mitigate this effect, as creditor scrutiny reduces opportunistic behaviour and encourages greater transparency in ESG disclosure. The findings remain robust under Heckman two-stage and GMM estimations, confirming the study’s hypotheses. This research contributes new insights to the literature by emphasising the importance of governance structures in ESG practices, particularly financial leverage as a monitoring mechanism for controlling shareholders. It also highlights the persistent ESG disclosure gap in emerging markets and calls for stronger policies to enhance ESG transparency and investor protection.