The Joint Effects of Firm's Globalization and ESG Rating on Financial Performance: Evidence from Food Industry in Taiwan

The internationalization process helps firms accumulate business knowledge and experience; however, firms also enjoy the benefit of decreasing risk due to diversification. The Taiwanese food industry has encountered some difficulties in internationalization, including insufficient production capacity, high tariffs, the lack of long-term planning by the government, and inadequate support from internal organizations. Overall, it is relatively problematic for the food industry to achieve internationalization, and Environmental, Social, and Governance (ESG) is the trend of sustainable development for enterprises to fulfill. This paper empirically explores the joint impact of the degree of internationalization and ESG ratings on the financial performance of the Taiwanese food industry from 2015 to 2021. Our empirical results found that international diversification and ESG performance have joint positive and significant effects on the return on assets (ROA), return on equity (ROE), and return on sales (ROS) of the food industry, respectively. This means that the higher the internationalization of overseas companies in the food industry, the better the ESG performance would significantly improve its financial performance.