The effects of Greenwashing and Brownwashing on Corporate Financial Performance in Developed and Developing countries

Over the years, the interest of stakeholders towards sustainability practices has grown rapidly. As a result, companies are put under pressure to communicate their green policies in order to obtain legitimization. This resulted in two types of behaviors: greenwashing, namely companies that overstate their environmental performance in their reports, and brownwashing, namely companies that issue communication underestimate their environmental achievements. The purpose of the present research is to analyze the impact of these two communication strategies on corporate financial performance, differentiating between developing and developed countries, using an unbalanced panel of 2.947 public traded companies located in 65 countries, for the years from 2006 to 2017.