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<p>Despite extensive scholarly attention to environmental, social, and governance (ESG) integration in multinational enterprises (MNEs), little is known about how ESG disclosures influence legitimacy spillover dynamics. This study investigates legitimacy spillovers by exploring the effects of parent firms’ ESG disclosures on the financial performance of overseas subsidiaries. This study constructs a dataset from 2010 to 2022 with subsidiary-year observations as the unit of analysis, using data on 1364 subsidiaries across 31 countries whose parent firms are 548 Chinese-listed companies. Our analysis reveals a positive relationship between parent firms’ ESG disclosures and the financial performance of overseas subsidiaries. Providing further support for our theoretical arguments, this relationship is positively moderated by (i) ESG-dominant party consistency between home and host countries according to whether they are government-led or non-government-led, (ii) business relatedness, and (iii) parent-subsidiary control associated with the extent to which the parent firm influences the behaviour of its subsidiaries.</p>

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How does parent firms' ESG disclosure affect overseas subsidiary financial performance? The case of Chinese multinationals

  • 期刊论文

  • 发表日期：

    2025年2月6日

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  • Zhongjuan Sun,
  • Jialin Feng,
  • Yikai Yuan,
  • Jiamu Sun

摘要

Despite extensive scholarly attention to environmental, social, and governance (ESG) integration in multinational enterprises (MNEs), little is known about how ESG disclosures influence legitimacy spillover dynamics. This study investigates legitimacy spillovers by exploring the effects of parent firms’ ESG disclosures on the financial performance of overseas subsidiaries. This study constructs a dataset from 2010 to 2022 with subsidiary-year observations as the unit of analysis, using data on 1364 subsidiaries across 31 countries whose parent firms are 548 Chinese-listed companies. Our analysis reveals a positive relationship between parent firms’ ESG disclosures and the financial performance of overseas subsidiaries. Providing further support for our theoretical arguments, this relationship is positively moderated by (i) ESG-dominant party consistency between home and host countries according to whether they are government-led or non-government-led, (ii) business relatedness, and (iii) parent-subsidiary control associated with the extent to which the parent firm influences the behaviour of its subsidiaries.