ESG Disclosure in Foreign Firms: Evidence from Asian Entrants into the US Capital Market

This study investigates the ESG disclosure practices of 236 Asian firms entering the US capital market, analyzing their 10-K reports from 2010 to 2023. By leveraging a large language model (LLM) to systematically extract and categorize ESG-related information, this research offers a nuanced understanding of how foreign firms approach ESG disclosures in comparison to their domestic US counterparts. Our findings reveal that these firms disclose less governance-related information than their US counterparts, while placing greater emphasis on environmental disclosures. Notably, governance disclosures are associated with lower market valuations, whereas environmental disclosures are linked to higher market performance. Additionally, firms with lower innovation investments tend to focus more on environmental disclosures. These results suggest that Asian firms entering the US market should strategically tailor their ESG disclosures to enhance both market acceptance and performance. This study also contributes methodologically by employing LLMs to analyze unstructured textual data, offering a more efficient and comprehensive approach to ESG disclosure analysis. Overall, the paper advances our understanding of how ESG strategies influence firm performance and provides new insights into the global ESG landscape.