Does "Entity List" Hinder The High-Quality Development Of Chinese Firms?

Starting in March 2018,the US government announced additional tariffs on imported steel and aluminum products,and further added high-tech products such as semiconductors and aerospace equipment to a list about additional tariffs.As the United States has listed a number of Chinese firms on the Entity List in the name of its own national security,the United States has increasingly imposed technological blockade on China.Since then,the trade friction between China and the United States has intensified.The essence of the entity list released by the US is a scientific and technological tug of war between China and the US.Its fundamental purpose is to contain China’s technological development and strike a precise blow against the strategic plan "Made in China 2025".Entity List may lead to the rupture of transactions between Chinese firms and overseas suppliers,seriously affecting the participation of Chinese firms in the international cycle.Therefore,exploring the impact of the Entity List on the development quality of Chinese listed firms is the top priority of in-depth research on Sino-US trade frictions from both theoretical and practical levels."Peer Effect" refers to the change in decision-making and behavior of individuals in a specific group influenced by other individuals in the same group.In other words,the relationships and interactions within the group have an important influence on the decisions and behaviors of the focus firms,and can lead to the convergence or imitation of the behaviors of the member firms.Especially when the decision-making environment is uncertain,Peer Effect is more likely to occur.Although the Entity List issued by the United States did not directly sanction Chinese listed firms,it involved 19 Chinese mainland institutions in the corresponding industries and indirectly brought objective external impact on the corresponding listed firms in the related industries.Thus,it is of great practical significance to study the Peer Effect on the firms in the Entity List.This dissertation takes the Peer firms in the same industry as the firms involved in the Entity List(i.e.,Peer firms)as the main research object,and on this basis studies whether the Entity List has an impact on the Peer firms corresponding to the firms which are involved in the Entity List through the Peer Effect.In accordance with the important directives of the 19th CPC National Congress,China’s economic development has begun to shift toward a high-quality development.There is a strong relationship between the quality of development and the profound changes in the development model,economic structure and growth drivers.Among them,the development quality of micro firms is of vital importance to the high-quality economy development in China.In the past,most studies on the Sino-US trade frictions’influence were from the views of the macro-level economic and social issues,while there were few studies on the micro-level enterprise decision-making and enterprise development quality.The resolution of the sixth Plenary Session of the 19th CPC Central Committee pointed out that changes in the external environment have brought many new risks and challenges.On this basis,China needs to achieve high-quality development and promote three major changes in the quality of economic development urgently.Based on this,it is of great academic value and practical significance to study the influence of Entity List on the development quality of Chinese firms.In this context,will the Entity List from the US push the Peer firms to improve the quality of their development?Does the Entity List inhibit or "force" the high-quality development of Chinese firms?What is the certain mechanism of these influence from the Entity List?In view of the above problems,this paper takes firm innovation,accounting information quality,investment efficiency and total factor productivity as four dimensions to measure the development quality of firms,and carries out a series of specific research.Based on this,this paper adopts the multi-period differential difference model(DID)to manually collect entity lists issued by the Bureau of Industry and Security of the Us Department of Commerce from 2018 to 2020,and takes listed firms in their industries listed in entity Lists as the main research object of this paper.This paper mainly studies the following research questions:what is the impact on the development quality of listed firms after their industry is included in the entity list?In the analysis of firm heterogeneity,which firms whose industry is included in the Entity List have a more significant impact on the development quality?(3)Through what mechanism does the inclusion of the industry in the Entity List affect the development quality of the firm?On this basis,this paper uses the Propensity Score Matching DID(PSM-DID)after propensity score matching to match the firm samples affected by the Entity List with the samples not affected,in order to alleviate the endogeneity problem.Additionally,parallel trend test,PSM and placebo test were used to verify its robustness.First of all,considering that the Entity List mainly restricts Chinese firms’ access to external technical support in the form of technology export control,this paper studies the impact of the Entity List on the innovation activities of the Peer firms.It is found that the inclusion of the industry in the Entity List has a significant enhancement effect on the innovation activities of firms in the Peer firms.Among them,the number of invention patent applications increased the most,indicating that the industry being included in the Entity List has a significant promotion effect on the total number of patent applications(especially the number of invention patent applications)of the experimental group(firms in the Entity List).The empirical results show that,compared to control group firm(the firm whose industry is not does not involved in the Entity List),the experimental group have more patent applications,and its significant statistical significance means the fact that a industry is included in the Entity List has contributed to its Peer firms’ innovation.Therefore,the Peer Effect can be verified by"deterring" the Peer firms in the Entity List to increase innovation drive,and the main driving factor is the increase of invention patents.Another analysis shows a conclusion that compared with private or small-medium-sized firms,involving in the industry in the Entity List has a stronger effect on the increase of innovation input and output of stateowned firms and large firms.Therefore,this paper draws the following conclusions:The Entity List released by the US can force relevant Chinese firms to strengthen independent innovation and improve R&D input and output level.In the face of the technology export control imposed by the United States,Chinese firms in related industries should reduce their technological dependence on the U.S.and other developed countries,continue to strengthen their independent innovation ability,and further promote the reform of the quality of real economy development with micro enterprise innovation as a driving force.Secondly,considering that with the Entity List,the Peer listed firm will get more attention by all stakeholders and according to the accounting information’s mediation effect for reducing the information asymmetry,this paper further studied how the Entity List influence the Peer firms’ accounting information quality.The study found that the accounting information quality of the Peer firms was significantly improved after its industry was listed in the Entity List.Further analysis shows that Entity List plays a stronger role in promoting the accounting information quality of firms that are not the"big Four" auditing,with high industry concentration and low level of science and technology.This mechanism is mainly achieved by reducing the first type agency problem.The industry’s involving in the Entity List makes the related Peer firms improve the accounting information quality with an improvement of the development quality of Chinese firms.This shows that Chinese firms have the rational thinking and ability to analyze and solve problems when facing external shocks.In the above several types of firms,before and after the release of the Entity List,those firms with low accounting information quality,the quality of accounting information has been significantly improved,shows that entity list can govern and encourage backward firms to improve their development quality.The conclusion of this part provides empirical evidence for dealing with the uncertainty of trade policy and has certain practical significance.Thirdly,improving investment efficiency is an important link in realizing highquality development of firms.Therefore,this research takes the investment efficiency of listed firms as the third research object to study the mechanism of the Entity List affecting the investment efficiency of firms in the Peer firms.It is found that the investment efficiency of related firms is significantly improved after their corresponding industries are listed in the Entity List.Compared with small and medium-sized firms and firms with high-leveled financing constraint,the Entity List has a more significant promoting effect of the investment efficiency for large-sized firms and the one with less financing constraint.This mechanism can be realized by reducing the tendency of managerial myopia.Being included in the Entity List allows relevant Chinese firms to improve investment efficiency,which shows the strong resilience of the Chinese economy in the face of external shocks and the ability to make better investment decisions to cope with the crisis.The results interpret the conference spirit of the sixth Plenary Session of the 19th CPC Central Committee;The improvement of investment efficiency of micro firms can provide new impetus for the reform of real economy development quality.Finally,since total factor productivity can comprehensively reflect the development quality of firms,this dissertation takes Total Factor Productivity(TFP)as the fourth research object to study the impact of the Entity List on TFP of firms.This paper finds that TFP of the Peer firms increases significantly after the industry is included in the entity list.With a further analysis,it is found that compared with the state-owned firms,large firms,high-concentration industry firms and the Midwest firms,the Entity List shows a stronger TFP promotion for firms with large survival and competition pressure.This mechanism can be realized by reducing the first type agency problem,reducing the myopia of managers and increasing media attention.Therefore,it is necessary to pay attention to the media and other external supervision mechanism.At the same time,China should deepen market-oriented reformation,perfect the market economic system,promote the free flow of production factors,optimize enterprise survival mechanism,to stimulate the firms to improve their TFP.