Long-term orientation and outward foreign direct investment: Evidence from Chinese listed firms

There is growing interest in comprehending how cultural traits affect firms' behaviour. In this paper, we examine the effect of managerial long-term orientation (LTO), an intrinsic cultural trait, on the firms' foreign direct investment (FDI) decisions. Our empirical analysis indicates that the LTO plays a positive role in firms' FDI decisions and the results remain robust when subjected to a variety of robustness tests. To address potential endogeneity concerns, we employ the CEOs' early-life disaster experience as an instrumental variable. Further examination reveals that financing costs act as a mechanism through which the LTO influences firms' FDI. Finally, heterogeneity analysis indicates that the positive effect of LTO on OFDI is more pronounced for greenfield relative to brownfield FDI, for small-size firms relative to large-size firms and for private firms relative to state-owned firms.