How Does Exposure to EITI Member Countries Affect Extractive Industry Conduct?

Abstract

We analyze the effect of petroleum company exposure to host countries that are members of the Extractive Industry Transparency Initiative (EITI) on corporate conduct. To identify causal effects of company EITI exposure, we combine fixed effects models with a shift-share instrumental variable approach. Our results show that increased exposure to EITI member countries increases the amount of negative media attention related to environmental, social and governance (ESG) matters a company receives. This reflects both a significant increase in the range of ESG issues companies receive negative attention on, and an increase in the depth of criticism on individual issues, in particular corruption. The increased negative attention is unlikely to reflect a constructive exposure of companies to more transparent institutions, as company policy on corresponding ESG dimensions shows no improvement with increased EITI exposure. Our results instead suggest that EITI exposure is at best inconsequential for corporate behaviour, and at worst contributes to greenwashing of extractive company conduct.