ESG Disclosure, ESG Performance, and Outward Foreign Direct Investment: Evidence from Chinese Listed Firms

This study investigates the relationship between environmental, social, and governance (ESG) disclosure and outward foreign direct investment (OFDI) by emerging-market firms. Using a panel of Chinese A-share listed firms from 2017 to 2023, we construct a firm-level disclosure rate from the industry-specific indicators underlying the ChinaBond ESG database. The disclosure rate is defined as the number of applicable ESG indicators disclosed by a firm divided by the total number of applicable indicators. The results show that ESG disclosure is positively associated with OFDI and that the association becomes stronger when the standardized disclosure measure exceeds 0.156. Environmental and governance disclosure have stronger effects than social disclosure. Financing constraints and agency costs weaken the relationship, whereas innovation capability strengthens it. The results remain robust to instrumental-variable estimation, lagged explanatory variables, and alternative sample restrictions. When ESG disclosure and third-party ESG ratings are included jointly, disclosure retains the larger coefficient. These findings indicate that disclosure has an informational and legitimating role in the overseas expansion of Chinese firms that is distinct from externally assessed ESG performance.