N°25-49: Digital Washing under Conflicting Institutional Logics: Evidence from China

This study examines how employee pressure influences digital washing—when firms exaggerate their digital transformation in public disclosures without matching substantive, actual actions. Using data on Chinese listed firms from 2008 to 2021, we measure digital washing as the gap between digital-related keywords in annual reports and digital-related intangible assets. Results show that firms facing higher employee pressure are more likely to engage in digital washing. This effect is more pronounced in state-owned firms, labor-intensive firms, and firms in less market-oriented regions. A Difference-in-Differences analysis using the 2017 U.S.-China trade war supports our findings. Moreover, the consequences test shows that digital washing is associated with increased stock liquidity, indicating a favorable market response to digital washing. Overall, the findings highlight how firms facing conflicting institutional logics—pressures to modernize through digital transformation while maintaining employment—may engage in digital washing as a response.