The Impact of Government Environmental Auditing on Corporate ESG Greenwashing

ABSTRACT Government environmental auditing, as a critical tool for regulating corporate behaviour and promoting market green transformation, exerts a substantial influence in mitigating corporate ESG greenwashing practices. Focusing on A‐share listed corporations in China during the period 2009–2023, this analysis utilises a double machine learning approach to investigate the causal effects and internal mechanisms of government environmental auditing on corporate ESG greenwashing. The analysis indicates that: (1) Government environmental auditing exerts a significant inhibitory effect on corporate ESG greenwashing. This remains valid after rigorous testing. (2) Heterogeneity tests show that this inhibitory effect is stronger in state‐owned enterprises, heavily polluting corporations and large‐scale corporations. (3) In terms of mechanisms, government environmental auditing reduces corporate information disclosure catering, optimises green investment allocation and regulates earnings management activities and inefficient investments, thereby curbing corporate ESG greenwashing.