Corporate ESG Greenwashing: Does Regulatory Proximity Matter?

ABSTRACT Environmental, social, and governance (ESG) greenwashing undermines sustainable development, yet the influence of regulatory proximity on oversight is understudied. By introducing the “distance decay effect” from geoeconomics into ESG misconduct research and using a sample of Chinese listed firms from 2009 to 2022, this study reveals a counterintuitive finding: Proximity to the regional offices of the China Securities Regulatory Commission (CSRC) is positively associated with ESG greenwashing. Mechanism analysis reveals that firms neighboring regional offices are more likely to engage in rent‐seeking to achieve regulatory capture for ESG greenwashing, and the triple‐difference (DDD) estimation further confirms this finding. Further analyses show that the positive effect is more pronounced among firms without political connections and located in regions with poor intercity transportation, weaker Confucian cultural influence, and higher levels of corruption. Meanwhile, anti‐corruption efforts and exposure of corporate negative events significantly weaken the positive impact. Our study offers crucial policy implications for regulators and stakeholders.