Not so generous after all? Foreign ownership and CSR overspending in emerging markets

Abstract

Research Summary Is foreignness a liability or an asset when firms decide on CSR spending? We examine how foreign ownership influences CSR overspending, defined as spending that exceeds legally mandated thresholds, in emerging markets. Using data from 320 publicly listed firms in India (2015–2023), we find that higher foreign ownership is associated with lower CSR overspending, challenging the assumption that foreign firms are more generous CSR spenders. This relationship is moderated by the ESG reputation of the foreign owner; owners recognized for “doing good” tend to reduce overspending, while those linked to controversies increase it. Our contingency‐based perspective suggests that whether foreignness acts as a liability or an asset depends on firm‐specific characteristics, complementing research that emphasizes institutional‐level explanations for foreign firm behavior in emerging markets. Managerial Summary Foreign firms operating in emerging markets often invest in corporate social responsibility (CSR) initiatives within their host countries. However, do they always need to spend more than legally required? Our study examines 320 companies in India between 2015 and 2023 and finds that firms with higher foreign ownership tend to spend less beyond the legal CSR requirement, especially when their foreign owners already have a strong reputation for doing good. On the other hand, if those owners have ESG‐related controversies, the firms are more likely to overspend on CSR to repair their image. These findings suggest that foreignness can be a strategic asset, not a liability, if supported by a positive reputation. Firms should align their CSR strategy with both ownership structure and reputational risks.