Loose-lipped Leviathan? State Ownership and Transparency in Foreign Direct Investment

Abstract: Recent business scholarship has demonstrated a renewed interest in state enterprises. We contribute to this emerging field of research by examining the effects of state ownership on the transparency of foreign direct investment (FDI). Using the global petroleum industry as a laboratory, we develop theory and examine empirically the effects of state ownership on disclosures regarding outward and inward FDI. We find that state ownership reduces FDI transparency; that SOEs’ disclosures are less sensitive to host-country political risk than private firms; that investments by SOEs from more democratic countries tend to be more transparent; and that inward FDI is more opaque in the presence of a host-country SOE.