How Does Carbon Emissions Efficiency Affect OFDI? Evidence from Chinese Listed Companies

Abstract

With the in-depth promotion of the “double carbon” strategy, the effectiveness of the green and low-carbon transition is not only fundamental to breaking the environmental shackles of domestic economic development, but is also an inevitable choice for Chinese enterprises to participate in international economic cooperation in the context of global climate change. However, the relationship between green low-carbon transition effects and outward foreign direct investment (OFDI) has not been adequately studied, and the transmission mechanism is not yet clear. Based on the above research gaps, this study made an empirical analysis on how carbon emissions efficiency affects companies’ OFDI using the OFDI data of China’s A-share-listed companies and matching carbon emissions efficiency data with the cities where listed companies are located, from 2007 to 2019. This study found that carbon emissions efficiency increases the possibility of OFDI, and carbon emissions efficiency significantly expanded the scale of OFDI through reducing financing costs and improving technological innovation, and the regression results are all significantly positive at the 1% level. We used ventilation coefficients as the instrumental variable, and the 2SLS results showed that this correlation is still robust. The heterogeneity analysis found that the role of carbon efficiency in promoting OFDI is more prominent for SOEs, large companies, clean companies and companies in competitive markets. In addition, financial development can positively moderate the influence of carbon emissions efficiency on OFDI, and carbon emissions efficiency deepens the embeddedness of the investment market compared to the degree of diversification of the corporate OFDI market. This research deepens the theoretical study on the factors of China’s OFDI, and provides insights for the government to coordinate carbon emissions efficiency and OFDI growth to achieve sustainable development. This study proposes continuing to promote clean production enterprises to shape their own sustainable development advantages, continuing to optimise the market environment and talent development environment, grasping the financing policy and technical support of the two important means, and accelerating the internationalisation of self-owned brands. These are the urgent priorities in driving Chinese enterprises to ‘go global’.