Political Risk and Firm Exit : Evidence from the US-China Trade War
Does international conflict induce foreign firms to “follow the flag” and exit from a profitable market? We show that the US-China trade war broadly elevated political risks for multinational corporations (MNCs) operating in China, increasing firm exit overall. However, investment treaties can mitigate political risks at the country level while firm entrenchment determines resilience to risk at the firm level. Using a new dataset on all foreign-invested firms registered in China between 2014 and 2019, we implement difference-in-difference and triple-difference models to isolate the impact of increased political risks on MNC exit in the context of the US-China trade war. Our findings show that US and allied firms were not more likely to exit China, suggesting that foreign direct investment outflows do not "follow the flag." Instead, firm exit is determined by the balance of heightened political risks against the availability of firm-level and institutional resources to mitigate these risks
Year of publication: |
[2021]
|
---|---|
Authors: | Vortherms, Samantha ; Zhang, Jiakun Jack |
Publisher: |
[S.l.] : SSRN |
Subject: | China | Handelskonflikt | Trade dispute | Marktaustritt | Market exit | Schätzung | Estimation | Wirkungsanalyse | Impact assessment |
Saved in:
freely available
Extent: | 1 Online-Ressource (46 p) |
---|---|
Series: | 21st Century China Center Research Paper ; No. 2021-09 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 2, 2021 erstellt |
Other identifiers: | 10.2139/ssrn.3916186 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013212827
Saved in favorites
Similar items by subject
-
The consumption response to trade shocks : evidence from the US-China trade war
Waugh, Michael E., (2019)
-
The Consumption Response to Trade Shocks : Evidence from the US-China Trade War
Waugh, Michael E., (2019)
-
The US-China Trade Deal : Back of the Envelope Estimate of the Economic Impact
Ciuriak, Dan, (2020)
- More ...
Similar items by person