From disclosure to distortion: How strategic ESG disclosure shapes green innovation bubbles

Strategic environmental, social, and governance (ESG) disclosure practices that create favorable impressions while concealing unfavorable environmental performance have become increasingly common among corporations. This study investigates how such practices influence green technology innovation bubbles, where firms prioritize innovation quantity over quality. Drawing on institutional theory and impression management perspectives, we examine this relationship using Chinese A-share listed companies (2015–2024). Through propensity score matching, difference-in-differences, placebo tests, and IV approaches, we establish that strategic ESG disclosure positively influences green-innovation bubbles. CEO green experience weakens this relationship, whereas managerial myopia strengthens it. Information asymmetry and greenwashing mediate this relationship. The effects are stronger for non-SOEs, during periods of high economic uncertainty and under weaker environmental regulations. Our study contributes to the sustainability literature by documenting how strategic ESG behavior distorts innovation patterns and provides policy implications for designing effective disclosure regulations.