GREENWASHING AND ITS EFFECTS ON FIRM RISK, REPUTATION, AND FINANCIAL PERFORMANCE: A STUDY OF MARKETING CAPABILITIES
Lin Woon Leong
Chong Siong Choy
Irfah Najihah Basir Malan
DOI:
Keywords:
Greenwashing, Firm Risk, Corporate Reputation, Corporate Financial Performance, Marketing Capability, System GMM, Automotive Industry
Abstract
This empirical study investigates the effects of greenwashing on firm risk, corporate reputation, and financial performance within the global automotive industry, with a specific focus on the moderating role of marketing capability. By analysing a panel dataset of 611 automotive firms from 2015 to 2023 using the System Generalized Method of Moments (System GMM) methodology, the study finds that greenwashing significantly increases firm risk and negatively affects reputation and financial performance. However, robust marketing capabilities can mitigate these detrimental effects. The study contributes to the corporate sustainability literature by illustrating the dual role of marketing, which can either amplify or alleviate the impacts of greenwashing. Practically, it advises automotive firms to carefully manage environmental claims and develop strong marketing strategies to counteract the risks associated with greenwashing. Furthermore, policymakers are encouraged to establish regulatory frameworks that deter deceptive practices and promote genuine sustainability, thereby protecting stakeholders and fostering ethical corporate behaviour.
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