Financing Constraints and Outward Foreign Direct Investment Performance: Evidence from Chinese Multinational Enterprises

This study examined the relationship between parent companies' financing constraints and outward foreign direct investment (OFDI) performance of Chinese multinational enterprises, measured by the return on assets of their overseas subsidiaries. Firm‐level data showed that parent companies' financing constraints were negatively associated with the operating performance of overseas subsidiaries, and this result remained robust across a series of robustness tests. The effect was more pronounced for subsidiaries whose parent companies had no export experience. Parent companies' financing constraints were associated with lower productivity and higher leverage among overseas subsidiaries. The results suggest that greater financial marketization, stronger industrial policy support, greater human capital investment, and greenfield entry may mitigate the adverse association between parent companies' financing constraints and OFDI performance. This study contributes to the literature by highlighting the role of parent companies' financing constraints in shaping overseas subsidiary performance and provides policy implications for improving firms' financing conditions and supporting OFDI development.