Going out by doing good: The effect of mandatory CSR disclosure on outward FDI of Chinese firms

Abstract This study examines the effect of mandatory corporate social responsibility (CSR) disclosure on outward foreign direct investment (OFDI) of Chinese listed firms. We address potential endogeneity concerns by employing propensity score matching (PSM) and difference‐in‐differences (DID) methods. Our analysis reveals that firms subject to mandatory CSR disclosure exhibit a significantly higher propensity to engage in OFDI and undertake a greater number of OFDI projects. This positive effect is particularly pronounced for specific sub‐samples of firms: highly polluting, non‐state owned, relatively large and those targeting developed economies for investment. Further investigation into the underlying mechanisms suggests that disclosing CSR information facilitates OFDI primarily by enhancing innovation capabilities, alleviating financial constraints and mitigating the liability of foreignness.