ESG Practices, International Reputation and Foreign Investor Confidence: Evidence from Emerging Markets

Abstract

Environmental, Social, and Governance (ESG) practices have emerged as a critical determinant of corporate competitiveness and sustainable value creation in global financial markets. As institutional investors increasingly integrate sustainability considerations into investment decisions, firms in emerging markets face growing pressure to enhance their ESG performance to attract foreign capital and strengthen international legitimacy. Despite the expanding body of literature on ESG, relatively little empirical evidence explains the mechanisms through which ESG practices influence foreign investor confidence, particularly within emerging economies characterized by institutional uncertainty and information asymmetry. Drawing upon Stakeholder Theory, Legitimacy Theory, and Signaling Theory, this study proposes a conceptual framework examining the direct relationship between ESG practices and foreign investor confidence while investigating the mediating roles of international corporate reputation and organizational transparency. Furthermore, institutional quality is proposed as a moderator that strengthens the relationship between corporate reputation and foreign investor confidence. The study employs a quantitative research design using survey data collected from senior executives, institutional investors, and sustainability professionals across emerging-market multinational corporations. Covariance-Based Structural Equation Modeling (CB-SEM) was employed to validate the measurement and structural models. The anticipated findings are expected to demonstrate that ESG practices significantly enhance international corporate reputation and organizational transparency, thereby increasing foreign investor confidence. The study contributes to international business, corporate sustainability, and international finance literature by extending the understanding of ESG-driven investment behavior in emerging markets. The findings also provide practical implications for corporate managers, policymakers, regulators, and international investors seeking to promote sustainable investment ecosystems.