This study investigated the impact of China’s new environmental protection law on the greenwashing of A-share listed companies. By employing the difference-in-differences (DID) method, this study reveals that the EPL exerts a significant inhibitory effect on corporate greenwashing behavior. To ensure the robustness of the results, several tests are conducted, including parallel trend tests, placebo tests, and propensity score matching DID (PSM-DID), all of which confirm the reliability of the findings. This paper explores the influence mechanism of the EPL through constructing the institutional deterrence mechanism, cost effect mechanism, and financing constraint mechanism. It is found that the EPL has a more significant inhibitory effect on economically developed regions, non-high-tech industries, and non-state-owned enterprises. Finally, specific policy recommendations are put forward from macro and micro perspectives.

The potentially serious economic consequences of China’s severe air pollution problem cannot be overlooked, especially the impact on corporate innovation, which is a core driver guiding firms towards efficient and high-quality development. This paper explores the direct effect and mechanism of PM2.5 on firms’ innovation output through the identification strategy of instrument variable. Based on the data of Listed Companies in China from 2003 to 2016, we used thermal inversion as the instrument variable for PM2.5 for estimation. The results show that each 1 ug/m³ increase in PM2.5 concentration causes an average reduction in innovation output of listed companies by about 7.0%. The test of “Porter hypothesis” shows that environmental regulation has not encouraged firms to innovate more. We further used the 2013 China Social Survey (CSS) data to verify the human capital mechanism of PM2.5 affecting firm innovation at micro level. The results show that PM 2.5 deteriorates the healthy human capital in a firm, which reduces the innovation output. This article helps to understand the relationship between air pollution and firms’ innovation and to develop appropriate policies.