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Lv, et al.

ratio reflects the extent of financial resources that a firm ownership concentration and management shareholding
can freely allocate and utilize. ratio reflect the equity distribution within the company,
while the size of the board of directors determines the
4.2.4. Control variable strategic decision-making ability of a company, and the
Referring to the research of Zhao and Lee and Shang number of R&D personnel reflects the personnel structure
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et al., this study selected control variables from two of a company. These four indicators effectively measure
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aspects, corporate finance and corporate governance, the governance capacity of a company and can reflect
to represent a corporate ESG Gws behavior. Financial how the company makes real environmental investment
variables at the company level included enterprise size decisions, which may affect Gws behavior, under the
(Size), current ratio (Cr), asset turnover (Ato), book- control of various stakeholders. The description of
to-market ratio (Bm), audit fee (Audit fee), and salary specific indicators is summarized in Table 1.
sum (Salary sum). These indicators reflect the financial
status and operating ability of an enterprise, and are one 4.3. Model construction
of the most critical factors affecting the development 4.3.1. Benchmark regression
of the enterprise. In addition, these indicators also The CEPI policy is strictly exogenous to enterprises,
directly affect the total environmental investment and and the actions of enterprises cannot affect its specific
environmental behavior decisions of enterprises. For implementation. Meanwhile, CEPI adopts a phased
example, firm size represents a firm’s market influence approach for entering each province, autonomous
and sense of social responsibility. Larger firms are more region, and municipality directly under the central
likely to be noticed, and controlling for firm size can government, leading to differences in the inspection
isolate the impact of the size effect on Gws. The current time faced by enterprises in different regions. Provinces
ratio reflects the short-term solvency and liquidity of that have not been inspected in the current period
the company. Cash flow status can affect a company’s were used as a control group. Therefore, the basic
environmental investment, as companies with tight cash conditions of quasi-natural experiments were met.
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flows are more likely to engage in Gws to shape their The difference-in-differences (DID) method is widely
environmental image. recognized in the research community for its ability
Corporate governance variables included top to mitigate endogeneity problems, reduce errors from
shareholding concentration (Top), management omitted variables, and provide a detailed and accurate
shareholding ratio (Mshare), R&D personnel evaluation of the effects of national policies. At the
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(Rdperson), and board size (Board). Among them, same time, CEPI inspectors have a distinct working

Table 1. Definition of variables
Variable type Symbol Definition
Independent variable Cepi Interaction terms for the inspector province dummy variable and the time dummy variable
Dependent variable Gws After standardization, the disclosure score was subtracted from the actual performance score
Moderator variables Fs Ratio of an enterprise’s quick assets to total liabilities
Control variables Size Logarithmic value of total assets of the enterprise at the end of the year
Cr Current assets to current liabilities
Ato Ratio of operating income to average total assets
Bm Total assets to market capitalization
Audit fee Logarithmic value of corporate audit costs
Top Ratio of shareholding of the largest shareholder to the total number of shares
Mshare Management shareholding to total shares
Rdperson Logarithmic values for corporate R&D staff
Board Logarithmic value of the number of board members
Salary sum Logarithmic value of total employee payroll
Abbreviations: R&D: Research and development; cepi: Central environmental protection inspection; Gws: Greenwashing; Cr: Current
ratio; Ato: Asset turnover, Bm: Book-to-market ratio; Fs: Financial slack.

Volume 22 Issue 4 (2025) 224 doi: 10.36922/AJWEP025280219