Institutional Innovation in Opening-Up and the Governance of Corporate Greenwashing: Evidence from China’s Pilot Free Trade Zones

Abstract

Under China’s “dual circulation” development paradigm, whether FTZ policies can promote truthful environmental disclosure and curb corporate greenwashing is a key issue. Using GIS technology to precisely identify listed firms and subsidiaries located within FTZs, this study applies a difference-in-differences model to examine the impact of FTZ policies on greenwashing. The results show that FTZ policies significantly reduce greenwashing, with stronger effects for firms having more subsidiaries, higher subsidiary shares, and greater registered capital in FTZs. Mechanism analyses indicate that improved financing access, strengthened government–enterprise green collaboration, and deeper integration into international supply chains—particularly through trade facilitation reforms—are the main channels. No significant spillover effects are found for non-FTZ firms in the same city, underscoring the importance of precise GIS-based identification. These findings provide robust evidence on how FTZ policies curb corporate greenwashing and support firms’ participation in sustainable global development.