EconPapers    
Economics at your fingertips  
 

Foreign investment policy, market entry and corporate ESG performance

Xinge Li, Zheren Chang and Jiangyi Qi

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: This study examines the impact of foreign investment policies on the Environmental, Social, and Governance (ESG) performance of domestic enterprises, utilizing data from Chinese manufacturing listed companies spanning from 2013 to 2022. Employing a Difference-in-Differences (DiD) methodology for empirical analysis, the research reveals that the liberalization of foreign investment policies significantly enhances corporate ESG performance. This finding remains robust after conducting parallel trends tests, placebo tests, and robustness checks. The relaxation of foreign investment policies facilitates the market entry of foreign-invested enterprises and increases foreign capital penetration, thereby exposing domestic enterprises to stricter international environmental standards and regulatory requirements. Consequently, this leads to improved environmental performance and elevated social reputation and brand value for domestic firms. Mediation analysis indicates that foreign market entry plays a pivotal role in the influence of foreign investment policies on ESG performance. Heterogeneity analysis further demonstrates that state-owned enterprises (SOEs) experience a more pronounced improvement in ESG performance compared to non-state-owned enterprises (NSOEs) under the relaxation of foreign investment policies. This research offers valuable insights for governments in formulating foreign investment policies and for enterprises in enhancing their ESG performance, emphasizing the need to continue advancing the liberalization of foreign investment policies and encouraging domestic enterprises to learn from foreign advanced experiences and technologies to achieve sustainable development.

Keywords: Foreign investment policy; Market entry; ESG performance (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521925002868
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002868

DOI: 10.1016/j.irfa.2025.104199

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-05-20
Handle: RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002868