The contingent effects of foreign ownership on ESG performance under financial performance feedback

Minji Kim, Hye-Kyung Yu and Tohyun Kim

Finance Research Letters, 2025, vol. 78, issue C

Abstract: This study explores how foreign ownership shapes ESG performance under varying financial performance feedback, drawing on the behavioral theory of the firm. Among Korean manufacturing firms (2011–2023), we found that foreign ownership enhances ESG performance due to heightened standards and monitoring capabilities. However, under negative financial feedback, firms with higher foreign ownership reduce ESG engagement, reflecting investor prioritization of short-term financial returns. Positive feedback does not significantly amplify ESG initiatives, highlighting limits to foreign investor responsiveness during financial surpluses. These results underscore the dual role of foreign ownership, promoting sustainability in stable periods but retrenching under performance pressures.

Keywords: Performance feedback; Foreign ownership; ESG performance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004192

DOI: 10.1016/j.frl.2025.107156

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