The Influence of the Audit Committee's Environmental Expertise on Corporate Greenwashing Practices

Abstract This study examines the influence of an audit committee's environmental background on corporate greenwashing behavior, using a sample of Chinese A-share listed firms from 2010 to 2022. The empirical findings suggest that firms with audit committees possessing environmental expertise demonstrate significantly lower instances of "greenwashing". Mechanism analyses indicate that this effect is achieved by mitigating managerial short-termism, reducing green agency costs, and fostering green innovation. Further heterogeneity analyses reveal that the suppressing effect of an audit committee's environmental background on greenwashing is more pronounced in private firms, when the audit committee has higher reputational capital, when CEO power is relatively weak, when firms have more developed environmental governance systems, and in regions with higher levels of green finance development. Additional economic consequence tests show that by curbing greenwashing, audit committees with environmental backgrounds contribute to improved corporate green governance performance. This study provides novel theoretical and empirical evidence on the non-financial information governance role of audit committees, offering important implications for enhancing the credibility of environmental information disclosure and promoting sustainable corporate development.