Can New Energy Demonstration City policy improve ESG disclosure quality? Mechanism identification from the perspective of inhibiting corporate greenwashing

Abstract

Against the backdrop of the advancing "dual carbon" strategy and the global emphasis on sustainable development, ESG disclosure has become a critical dimension of corporate governance. However, the proliferation of ESG controversies, particularly corporate "greenwashing," has challenged the authenticity of these disclosures. This study constructs a quasi-natural experiment based on China's New Energy Demonstration City (NEDC) policy to systematically examine whether green policies can effectively curb ESG greenwashing and improve the quality of ESG disclosure. Using panel data from Chinese listed companies from 2009 to 2023, the study employs a difference-in-differences (DID) model to identify the causal effects. Empirical results show that the NEDC policy significantly reduces corporate greenwashing levels, demonstrating the practical effectiveness of mandatory green regulation in mitigating ESG controversies and improving disclosure quality. Mechanism analysis reveals that policies influence corporate disclosure behavior by enhancing media attention, alleviating financing constraints, and increasing the frequency of institutional research. Heterogeneity analysis indicates stronger governance effects in heavily polluting industries, non-manufacturing enterprises, and resource-based cities. Based on these findings, the study recommends transitioning green disclosure from "voluntary" to "mandatory," and establishing a collaborative supervision mechanism involving institutional investors and media to curb greenwashing, thereby enhancing the execution efficacy of green policies and corporate sustainable governance capabilities.