Speaker: Hui Chen, University of Zurich

Time: 10:00-11:30 a.m., July 10, 2023, GMT+8

Venue: Room 217, Guanghua Building 2

Abstract:

We analyze a manager's optimal reporting strategy when choosing between a green and a brown project in the presence of market feedback. The project's success requires the investment decision to match the state of nature. The manager may greenwash and misrepresent brown signals as green to attract more informed, responsible investors. Ex-ante, greenwashing reduces investors' information acquisition. However, it also makes them more willing to trade on their signals, strengthening feedback ex-post. Prices are less informative if the firm reports brown signals truthfully, increasing the expected externality associated with brown projects. Greenwashing efforts weaken market feedback and reduce firm value if the negative effect on the extensive margin of informed trading offsets the positive effect on the intensive margin.

Biography:

Hui Chen is a professor of accounting at the University of Zurich and a research fellow at Judge Business School, University of Cambridge. Her research primarily addresses the economic effects of accounting regulations and practices. She employs both analytical and empirical methods in her research, and has published in journals such as the Accounting Review, Review of Accounting Studies, Management Science, and Journal of Management Accounting Research. Her works have also been cited by influential news outlets, such as The New York Times, The Wall Street Journal, Forbes, and USA Today.

Source: Guanghua School of Management