A Conceptual Framework Linking Environmental Disclosure, Performance, and Foreign Direct Investment in Developing Countries

Abstract

This study proposes a conceptual framework explaining how environmental performance, environmental information disclosure, macroeconomic fundamentals and institutional quality jointly influence Foreign Direct Investment (FDI) inflows in developing countries. The model argues that environmental performance alone is insufficient to attract sustainable FDI unless it is supported by transparent disclosure and credible institutional structures. Environmental information disclosure is presented as a key mediating mechanism that enhances investor confidence by reducing information asymmetry, while institutional quality is introduced as a moderating factor that shapes the credibility and effectiveness of environmental improvements. Macroeconomic fundamentals are integrated as essential structural conditions that frame investor responses to environmental and governance signals. The framework contributes to the literature by offering an integrated perspective on sustainable FDI attraction and highlights important policy implications for developing economies seeking to strengthen their environmental credibility, transparency systems and institutional governance.