The impact of ESG ratings on corporate overseas performance: A quasi-experiment based on a staggered DID model

As global markets become increasingly interconnected, firms are striving to expand their operations internationally while maintaining sustainable growth. In this context, Environmental, Social, and Governance (ESG) factors are increasingly seen as essential for firms to enhance their competitiveness and long-term viability. ESG ratings, which assess a firm's commitment to sustainable practices, are gaining traction among investors and other stakeholders, influencing firm strategies and performance. However, despite the growing importance, there is a limited understanding of how ESG ratings impact a firm's international performance, particularly in emerging economies. This study addresses this gap by examining the influence of ESG ratings on the overseas business performance of Chinese A-share listed companies from 2011 to 2022. Using a staggered difference-in-differences (DID) approach, we found that ESG ratings significantly enhance firms' overseas revenue and gross profit. Additionally, we demonstrated that the positive effects of ESG ratings are mediated through improved corporate reputation and increased innovation, with non-polluting and high-tech firms benefiting most. Furthermore, regional heterogeneity results reveal that firms in the eastern regions experience the most significant benefits. This paper contributes to the literature by highlighting the mechanisms through which ESG ratings influence international business outcomes and offers practical insights for policymakers and firms aiming to integrate ESG strategies to enhance global competitiveness.