The Consequences of Relaxing Short-Selling Restrictions on Corporate Greenwashing_Vol. 3 No. 3 (JSE 2026)_Journal of Statistics and Economics (ISSN: 3005-5733)

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The Consequences of Relaxing Short-Selling Restrictions on Corporate Greenwashing

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DOI: https://doi.org/10.62517/jse.202611310

Author(s)

Chenyi Zhou

Affiliation(s)

School of Economics and Business Administration, Chongqing University, Chongqing, China *Corresponding Author

Abstract

In the context of the global green transition, the widespread practice of ‘greenwashing’-where companies exaggerate their ESG disclosures to substitute for actual compliance-has severely undermined the resource allocation efficiency of capital markets. Identifying and penalising such behaviour to ensure corporate honesty and diligence is a pressing concern demanding immediate scholarly attention.Drawing on data from A-share listed companies between 2014 and 2023, this paper evaluates the consequences of relaxing short-selling restrictions on corporate greenwashing. The findings indicate that relaxing short-selling restrictions significantly curbs greenwashing behaviour in listed companies in the subsequent period. The empirical analysis passed the parallel trends test and a series of robustness tests.Mechanism tests reveal that short-selling regulations exert a inhibitory effect through information extraction and risk deterrence. Heterogeneity analysis reveals that this relationship is more substantial in environments with weaker rule of law, in industries with higher pollution intensity, and for firms located in western China. The findings of this study enrich the oversight regimes of short-selling regulations in China, providing a basis and reference for regulating corporate behaviour and correcting mispricing in the capital market.

Keywords

Relaxation of Short-Selling Restrictions; Corporate Greenwashing; Information Extraction; Risk Deterrence

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