Study on the Impact of Corporate ESG Performance on OFDI Behavior
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Study on the Impact of Corporate ESG Performance on OFDI Behavior

Buyuan Liu 1*
1 Jilin University of Finance and Economics
*Corresponding author: liubuyuan66@163.com
Published on 24 July 2025
Volume Cover
AEMPS Vol.206
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-295-9
ISBN (Online): 978-1-80590-296-6
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Abstract

Against the background of the accelerated internationalization process of enterprises and the extensive penetration of ESG (Environmental, Social and Governance) concepts, this paper empirically examines the impact of ESG performance on enterprises' outward foreign direct investment (OFDI) behaviors and the mechanism of its action based on the panel data of Chinese enterprises in the period of 2009-2021. The results show that corporate ESG performance has a significant positive relationship with OFDI size, with OFDI size (natural logarithm) increasing by about 2.004 units on average for every 1-unit increase in ESG level, and that this positive effect is still robust after controlling for year fixed effects (coefficient 1.299, p< 0.05). Mechanism tests show that ESG performance indirectly promotes OFDI by alleviating financing constraints (KZ index): a 1-unit increase in ESG level is associated with a 1.117-unit decrease in the financing constraints index (p< 0.01), whereas for every 1-unit decrease in financing constraints, OFDI size increases by 0.155 units (p< 0.01), validating a partial mediating effect of financing constraints. In addition, firm size (positive), gearing ratio (negative) and management shareholding (short-term positive and long-term negative) are the key control factors affecting OFDI. The findings provide empirical support for firms to promote their internationalization strategies by enhancing ESG performance and alleviating financing constraints, and also provide a theoretical basis for policy makers to improve ESG guidance mechanisms to promote the high-quality development of corporate OFDI.

Keywords:

ESG performance, OFDI size, financing constraints, mediating effect

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Liu,B. (2025). Study on the Impact of Corporate ESG Performance on OFDI Behavior. Advances in Economics, Management and Political Sciences,206,1-11.

References

[1]. Eccles RG, Ioannou I, Serafeim G. The impact of corporate sustainability on organizational processes and performance. Management Science. 2014; 60(11): 2835-2857.

[2]. Friede G, Busch T, Bassen A. ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment. 2015; 5(4): 210-233.

[3]. Bénabou R, Tirole J. Individual and corporate social responsibility. Economica. 2010; 77(305): 1-19.

[4]. Porter ME, Kramer MR. Creating shared value. Harvard Business Review. 2011; 89(1/2): 62-77.

[5]. Dunning JH. The eclectic (OLI) paradigm of international production: Past, present and future. International Journal of the Economics of Business. 2001; 8(2): 173-190.

[6]. Buckley PJ, Clegg LJ, Cross AR, et al. The determinants of Chinese outward foreign direct investment. Journal of International Business Studies. 2007; 38(4): 499-518.

[7]. Luo Y, Tung RL. International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies. 2007; 38(4): 481-498.

[8]. Melitz MJ. The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica. 2003; 71(6): 1695-1725.

[9]. Buch CM, Lipponer A, Schnitzer M. Financing constraints and foreign direct investment: Firm-level evidence. Journal of International Economics. 2014; 92(1): 181-193.

[10]. Cheng B, Ioannou I, Serafeim G. Corporate social responsibility and access to finance. Strategic Management Journal. 2014; 35(1): 1-23.

[11]. Xie Hongjun, Lyu Xue. Responsible International Investment: ESG and China's Outward Direct Investment. Economic Research Journal. 2022; 57(3): 83-99. (in Chinese).

[12]. Kaplan SN, Zingales L. Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics. 1997; 112(1): 169-215.

[13]. Lamont CR, Polk C, Saa-Requejo J. The stock market and corporate investment: A test of q theory and alternative hypotheses. Journal of Financial Economics. 2001; 61(1): 141-187.

[14]. Wang Jian. Corporate ESG Ratings and Debt Financing Costs. Financial Research. 2022; (1): 48-58. (in Chinese).

[15]. Qiu Muyuan, Yin Hong. Corporate ESG Performance and Financing Costs in the Context of Ecological Civilization Construction. Journal of Quantitative Economics and Technical Economics. 2019; 36(3): 108-123. (in Chinese).

[16]. Wen Zhonglin, Zhang Lei, Hou Jietai, Liu Hongyun. Procedures for Testing Mediating Effects and Their Applications. Acta Psychologica Sinica. 2004; (05): 614-620. (in Chinese).

References

[1]. Eccles RG, Ioannou I, Serafeim G. The impact of corporate sustainability on organizational processes and performance. Management Science. 2014; 60(11): 2835-2857.

[2]. Friede G, Busch T, Bassen A. ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment. 2015; 5(4): 210-233.

[3]. Bénabou R, Tirole J. Individual and corporate social responsibility. Economica. 2010; 77(305): 1-19.

[4]. Porter ME, Kramer MR. Creating shared value. Harvard Business Review. 2011; 89(1/2): 62-77.

[5]. Dunning JH. The eclectic (OLI) paradigm of international production: Past, present and future. International Journal of the Economics of Business. 2001; 8(2): 173-190.

[6]. Buckley PJ, Clegg LJ, Cross AR, et al. The determinants of Chinese outward foreign direct investment. Journal of International Business Studies. 2007; 38(4): 499-518.

[7]. Luo Y, Tung RL. International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies. 2007; 38(4): 481-498.

[8]. Melitz MJ. The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica. 2003; 71(6): 1695-1725.

[9]. Buch CM, Lipponer A, Schnitzer M. Financing constraints and foreign direct investment: Firm-level evidence. Journal of International Economics. 2014; 92(1): 181-193.

[10]. Cheng B, Ioannou I, Serafeim G. Corporate social responsibility and access to finance. Strategic Management Journal. 2014; 35(1): 1-23.

[11]. Xie Hongjun, Lyu Xue. Responsible International Investment: ESG and China's Outward Direct Investment. Economic Research Journal. 2022; 57(3): 83-99. (in Chinese).

[12]. Kaplan SN, Zingales L. Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics. 1997; 112(1): 169-215.

[13]. Lamont CR, Polk C, Saa-Requejo J. The stock market and corporate investment: A test of q theory and alternative hypotheses. Journal of Financial Economics. 2001; 61(1): 141-187.

[14]. Wang Jian. Corporate ESG Ratings and Debt Financing Costs. Financial Research. 2022; (1): 48-58. (in Chinese).

[15]. Qiu Muyuan, Yin Hong. Corporate ESG Performance and Financing Costs in the Context of Ecological Civilization Construction. Journal of Quantitative Economics and Technical Economics. 2019; 36(3): 108-123. (in Chinese).

[16]. Wen Zhonglin, Zhang Lei, Hou Jietai, Liu Hongyun. Procedures for Testing Mediating Effects and Their Applications. Acta Psychologica Sinica. 2004; (05): 614-620. (in Chinese).

Cite this article

Liu,B. (2025). Study on the Impact of Corporate ESG Performance on OFDI Behavior. Advances in Economics, Management and Political Sciences,206,1-11.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: Digital Transformation in Global Human Resource Management

ISBN: 978-1-80590-295-9(Print) / 978-1-80590-296-6(Online)
Editor: Florian Marcel Nuţă Nuţă, An Nguyen
Conference website: https://www.icemgd.org/committee.html
Conference date: 26 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.206
ISSN: 2754-1169(Print) / 2754-1177(Online)

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