State ownership and transparency in foreign direct investment

We contribute to IB literature on state-owned multinationals by examining an understudied element of MNE strategy - transparency. Drawing insight from accounting, finance, and political science, we develop theory and hypotheses regarding ownership effects on FDI disclosure. We argue that transparency of outward FDI depends on both state ownership and home and host country institutions. We also posit that host governments harness their SOEs to exploit information disclosed by foreign MNEs, discouraging inward FDI transparency. We test our hypotheses using a unique transaction-level database from the global petroleum industry. Analyzing a sample of 965 investment disclosures across 81 developing and developed countries, we find state ownership reduces MNE transparency; SOEs are less sensitive to host country political risk than private firms; SOEs from better-governed countries are more transparent; and regardless of ownership, foreign MNEs are more opaque when investing in the presence of a host country SOE.