Does firm internationalization improve ESG performance? Evidence from China

Jing Zhou, Kaiwen Wu and Youwei Li

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: Amidst the current era of economic globalization, the internationalization of emerging market firms (EMFs) and their sustainable development are increasingly prominent. Environmental, Social, and Governance (ESG) has received widespread attention as an important indicator of sustainability. Using a sample from Chinese A-share listed companies spanning from 2012 to 2022, this study employs a difference-in-differences (DID) model to explore whether firms' outward foreign direct investment (OFDI) impacts their ESG performance. The results indicate that firms with OFDI have a higher level of ESG performance than those without, especially in the domain of environmental protection. This positive impact of OFDI on ESG performance is found to be strengthened by stronger CEO clan culture background but is weakened by higher financing constraints of firms. Our findings offer valuable insights for internationally operating EMFs, highlighting the importance of ESG practices in promoting sustainable development.

Keywords: Firm internationalization; Outward foreign direct investment; ESG; CEO clan culture background; Financing constraints (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003314

DOI: 10.1016/j.iref.2025.104168

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