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Outward direct investment as a shelter from external trade policy shocks: Firm‐level investigation of the US–China trade war

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  • Haoyuan Ding
  • Haichao Fan
  • Guangyuan Guo
  • Guoyong Liang
  • Tong Qi

Abstract

This study examines the effects of external trade policy shock from the US–China trade war on firm value. Using a merged data set of Chinese‐listed companies, our empirical results reveal that Chinese firms conducting outward direct investment in the US have significantly higher stock returns around the date of the outbreak of the trade war as compared with the lower returns of exporting firms. This indicates a sheltering effect of pre‐existing outward direct investment activities. Moreover, we find that the sheltering effect is more pronounced for production‐oriented projects, high tech industries and tariff‐targeted sectors, while it is weaker for state‐owned companies. Investissement direct sortant comme refuge contre les chocs de la politique sur le commerce extérieur: étude à l'échelle des entreprises de la guerre commerciale entre les États‐Unis et la Chine. Cette étude se penche sur les effets du choc de la politique sur le commerce extérieur de la guerre commerciale entre les États‐Unis et la Chine sur la valeur des entreprises. À l'aide d'un ensemble de données fusionnées sur les entreprises chinoises, nos résultats empiriques révèlent que les entreprises chinoises qui font des investissements directs sortants (IDE sortant) aux États‐Unis ont des rendements sur les actions considérablement plus élevés près de la date de l'éclosion de la guerre commerciale comparativement aux rendements plus faibles des entreprises exportatrices. Cela indique un effet de refuge des activités d'IDE sortant préexistantes. En outre, nous constatons que l'effet de refuge est plus prononcé pour les projets orientés sur la production, les industries de haute technologie et les secteurs ciblés par les tarifs, alors qu'il est plus faible dans les entreprises appartenant à l'État.

Suggested Citation

  • Haoyuan Ding & Haichao Fan & Guangyuan Guo & Guoyong Liang & Tong Qi, 2024. "Outward direct investment as a shelter from external trade policy shocks: Firm‐level investigation of the US–China trade war," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(4), pages 1203-1235, November.
    • Handle: RePEc:wly:canjec:v:57:y:2024:i:4:p:1203-1235
    DOI: 10.1111/caje.12742
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