["Business Ethics, the Environment &Responsibility, EarlyView. ", "\nABSTRACT\nThis study investigates the influence of greenwashing on the alignment between firm‐level stock returns and broader market trends, with particular attention to the mediating roles of investor sentiment, media coverage and sustainable fund ownership. The findings reveal that greenwashing significantly reduces return synchronicity by embedding unreliable firm‐specific environmental signals into stock prices, thereby impairing market efficiency. The results demonstrate that greenwashing amplifies sentiment‐driven trading among investors, attracts increased media coverage that further disseminates and legitimizes biased environmental narratives, and influences institutional investment decisions—particularly by sustainable funds, which tend to rely on superficial environmental disclosures. Additionally, the heterogeneous analysis indicates that the influence of greenwashing on stock price synchronicity is insignificant in heavily polluting industries due to heightened regulatory oversight and stakeholder scrutiny. This research adds to existing knowledge by linking greenwashing to stock price synchronicity, providing new insights into how selective environmental disclosures influence market behavior. By exposing the negative consequences of biased environmental disclosures, this study highlights the urgent need for stronger accountability standards, robust environmental reporting frameworks, and stricter regulatory oversight. Such measures are essential to ensure transparency, uphold market integrity, and protect investors from the adverse effects of deceptive corporate practices.\n"]