Environmental, social, and governance (ESG) play a vital role in promoting the sustained and stable development of firms. However, how the US ESG disclosure policy shapes investment decisions remains unclear. This study investigates Chinese A-share listed firms with overseas affiliates between 2006 and 2020. Using the United States Department of Labor’s Interpretive Bulletin 2016-01 as a quasi-natural experiment, it empirically tests how the US ESG disclosure policy influences the scale of Chinese firms’ outward foreign direct investment in the US (OFDIUS). The experimental and control groups were constructed according to the comparisons of the magnitude of changes in individual firms’ ESG scores and the median magnitude of changes in overall firms’ scores. This study finds that the US ESG disclosure policy significantly positively influences OFDIUS. However, the influence varies significantly because of ownership and industry types. This study finds that non-state-owned firms and non-heavy-polluting industries possess stronger incentives to adjust investment strategies to mitigate risk and gain market legitimacy. Mechanism analysis shows that the US ESG disclosure policy increases OFDIUS by improving the ESG performance. Robustness tests confirm the reliability of these findings, such as the placebo test and propensity score matching. This study offers insights for enhancing ESG disclosure policies and optimizing firms’ cross-border investment decisions.
Zan et al. (Thu,) studied this question.