Unintended societal outcome of investor protection: independent director liability and greenwashing
研究中国2020年新证券法加强独立董事个人责任如何意外导致企业更多漂绿行为，并分析其机制和异质性影响，对政策制定者校准问责框架有参考价值。
Purpose This study aims to investigate the unintended consequences of enhanced independent directors' (IDs) personal liability on corporate greenwashing behavior. Design/methodology/approach Using China's 2020 New Securities Act (NSA) as an exogenous shock of investor protection, we examine the impact of heightened legal accountability for IDs on corporate greenwashing behavior. Findings Our results show that enhanced ID personal liability significantly increases firm engagement in greenwashing. The mechanism stems from IDs' redirected focus towards financial oversight under liability pressure, coupled with firms' strategic diversion to symbolic environmental commitments. Cross-sectional analysis reveals amplified effects in non-state-owned enterprises with low gender diversity, high information opaqueness, weak external monitoring, and high compliance costs. Further, the greenwashing behavior induced by heightened ID liability damages shareholder returns, deviating from the NSA's goal of investor protection. Originality/value Our study contributes to director liability literature by exposing the “crowding-out” effect of regulatory mandates on sustainability governance and offers policymakers practical insights into calibrating accountability frameworks to deter corporate speculative behaviors.