Outward FDI and the Home-Market ESG Gap: A Test for Emerging Multinationals

Purpose - While emerging market multinational enterprises (EMNEs) are expected to enhance ethics through active outward foreign direct investment (OFDI), concerns are being raised about whether internationalization actually delivers ESG benefits to their home countries. Based on the stakeholder theory, we analyze the impact of OFDI on the EMNEs’ ESG gap, the difference between ESG disclosure and practice. We also examine how media perception and government ownership moderate the relationship beween OFDI and the ESG gap. Design/methodology/approach - This study utilizes panel data on 484 Chinese listed firms operating overseas from 2011 to 2021, conducting fixed-effect analysis on a total of 2,872 observations. Findings - First, we confirm that OFDI increases the ESG gap, and the robustness check shows that ESG practice improves with OFDI. It seems that the ESG gap is caused primarily by the higher expectations of EMNEs as they enter more overseas markets. Second, media perception and state ownership weaken the relaitonship between OFDI and ESG gap. Research implications or Originality - The research expands the ESG literature in international business and illuminates the dual pressure faced by EMNEs between foreign and domestic stakeholder responsibility. Furthermore, it highlights the role that media and state ownership play in mitigating the ESG gap, acting as a social watcher.