Corporate governance and the outward foreign direct investment: Firm-level evidence from China

This paper investigates the role of corporate governance in China's outward foreign direct investment (ODI) using a sample of Chinese public firms over the period 2009- 2015. Different from previous studies, which mainly use country-level aggregate data to examine China's ODI behavior, this study utilizes firm-level data to explore the impact of corporate governance on firms' ODI decision making. Building on the integration of agency theory and foreign direct investment theories, the study finds that ownership concentration, share ownership, and executive compensation significantly influence China's ODI flows in both full-sample and sub-sample estimations. The corporate gover-nance has an essential effect on firms' ODI flows in that the firms with better corporate governance are more interested in undertaking ODI projects. The results are robust across different sample periods and in both state-owned and non-state-owned firm sub-groups. The government may design some policies such as friendly tax regulations to stimulate private firms to invest overseas.(c) 2022 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.