To read this content please select one of the options below:

The ESG performance of companies and their outward foreign direct investment: evidence from China

Feng Wang (School of Economics and Finance, Xi’an Jiaotong University, Xi’an, China)
Huadan Han (School of Economics and Finance, Xi’an Jiaotong University, Xi’an, China)
Lei Zeng (School of Economics and Finance, Xi’an Jiaotong University, Xi’an, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 18 December 2024

136

Abstract

Purpose

Environmental, social and governance (ESG) performance has received significant attention around the world. Could robust ESG performance become a new advantage for supporting companies’ outward foreign direct investment (OFDI) in emerging markets? Prior studies have not articulated the nexus between ESG performance and OFDI. This paper aims to conduct both theoretical and empirical work to clarify the effect, especially the mechanisms of ESG performance on companies’ OFDI.

Design/methodology/approach

Using the data of A-share listed companies in China from 2010 to 2020, this paper empirically tests the effect and the mechanisms of ESG performance on companies’ OFDI.

Findings

Firstly, robust ESG performance increases the likelihood of companies engaging in OFDI and also augments the scale of such investments. Within the realm of ESG, environmental performance, social performance and governance performance all play important roles in fostering OFDI. Secondly, strong ESG performance promotes OFDI by enhancing the competitive edge and alleviating financial constraints. Also, environmental performance, social performance and governance performance individually contribute to supporting competitiveness and mitigating financial constraints. Thirdly, the effect of ESG performance on OFDI is particularly pronounced for companies targeting developed countries, those operating in heavily polluting sectors and those with significant institutional investor presence.

Originality/value

This study advances the applicability of the stakeholder theory in the realm of firm internationalization. Moreover, the findings of this paper provide new strategies for promoting the OFDI of companies in emerging market economies.

Keywords

Acknowledgements

Funding: This work was supported by the General Project of National Philosophy and Social Sciences Foundation in 2022: Driving effects, potential impacts and coordinating pathways of the forcing mechanism from China's dual carbon targets on its high-quality economic development [Grant No. 22BJY127].

Citation

Wang, F., Han, H. and Zeng, L. (2024), "The ESG performance of companies and their outward foreign direct investment: evidence from China", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2023-1807

Publisher

:

Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

Related articles