How does exposure to EITI member countries affect extractive industry conduct?
The literature on the effectiveness of the international governance initiatives has predominantly focused on effects on government conduct or country-level outcomes rather than companies. We analyze the effect of petroleum company exposure to host countries that are members of the Extractive Industries Transparency Initiative (EITI) on corporate conduct. To identify causal effects of company EITI exposure, we combine fixed effects models with a shift-share instrumental variable approach. Our results show that increased exposure to EITI member countries increases the amount of negative media attention related to environmental, social and governance (ESG) matters a company receives. The increased negative attention is unlikely to reflect a constructive exposure of companies to more transparent institutions, as company policy on corresponding ESG dimensions shows no improvement, the negative effect is driven by exposure to autocratic EITI countries of companies with a history of misconduct, and such companies are also attracted to EITI countries. Our results suggest that EITI exposure is at best inconsequential for corporate behaviour, and at worst contributes to greenwashing of extractive company conduct. Our analysis complements and expands a literature critical to the effectiveness of voluntary, soft international governance initiatives and raises questions about the power and interests shaping such initiatives.
