GREENWASHING AND FIRM VALUE: THE ROLE OF INSTITUTIONAL OWNERSHIP IN FINANCIAL SECTOR COMPANIESGREENWASHING AND FIRM VALUE: THE ROLE OF INSTITUTIONAL OWNERSHIP IN FINANCIAL SECTOR COMPANIES

Abstract

This study aims to examine the relationship between greenwashing and firm value, moderated by  institutional ownership, in financial sector companies during the 2021–2024 period. Grounded in signaling theory, this study argues that greenwashing practices can send misleading signals to investors when the information companies provide regarding their environmental commitments does not align with their actual environmental performance. This misalignment has the potential to erode investor confidence and trigger negative market assessments, thereby leading to a decline in firm value. This study employs a quantitative approach using a sample of financial sector firms from 2021 to 2024. The sample consists of 69 firms with a total of 276 observations. Regression analysis was used to test the hypothesis that the higher a firm’s level of greenwashing, the more significant its impact on firm value as measured by market-based indicators. The results of this study indicate that greenwashing has a significant negative effect on firm value. Furthermore, institutional ownership was found to significantly moderate the relationship between greenwashing and firm value in a negative direction. These results suggest that institutional ownership does not mitigate the negative impact of greenwashing as hypothesized, but rather reinforces this negative effect on firm value. 

Keywords: Greenwashing; Firm Value; Institutional Ownership