Do Investors Sanction Greenwashing? Selective Market Discipline in Fintech Firms

ABSTRACT We investigate whether stock market investors detect and penalise greenwashing. We draw on media reports of environmental, social and governance incidents at 321 US‐listed fintech firms between 2007 and 2025, within which greenwashing is identified, following RepRisk, as misleading communication about environmental practice. Investors impose no measurable price penalty when firms are publicly implicated in greenwashing, and the sample is large enough to have detected a penalty of the size observed for other conduct. Misleading communication that does not concern the environment is penalised, where cumulative abnormal returns are between 0.4% and 0.6% lower over the 2 weeks following the report, falling further to 0.8% over the 4 weeks before and after, whereas physical environmental damage draws no adverse reaction. The market therefore prices dishonesty, but the sanction depends on the domain of the false claim, and environmental claims by fintech firms fall outside it. Consistent with stakeholder theory, the results suggest that market‐based discipline exists but is selective, so that the truthfulness of environmental claims cannot be presumed to be enforced by investors where regulatory oversight is absent.