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Outward foreign direct investment risk, financial development level, and the performance of firms' nonlocal subsidiaries

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  • Zhang, Yilu
  • Gao, Xianang

Abstract

This study selects Chinese listed firms and regions from 2013 to 2023 as the research sample to examine the relationships among foreign direct investment (FDI) risk, the level of financial development (FC), and the performance of firms' nonlocal subsidiaries. The study presents the following main conclusions: First, there is a significant negative correlation between FDI risk and the performance of firms' nonlocal subsidiaries. Second, FC has a positive effect on the performance of firms' nonlocal subsidiaries. Third, FC plays a significant moderating role in the relationship between FDI risk and nonlocal subsidiary performance. Finally, the moderating effect of FC on the relationship between FDI risk and nonlocal subsidiary performance exhibits significant heterogeneity across firms with different levels of corporate governance. The findings provide important theoretical support for multinational enterprises undertaking FDI, particularly regarding how to enhance the performance of firms' nonlocal subsidiaries by optimizing financial support and strengthening corporate governance.

Suggested Citation

  • Zhang, Yilu & Gao, Xianang, 2026. "Outward foreign direct investment risk, financial development level, and the performance of firms' nonlocal subsidiaries," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s1544612325025073
    DOI: 10.1016/j.frl.2025.109258
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    References listed on IDEAS

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