Export controls and stock price fluctuations of affiliated companies: Empirical evidence from the US entity list against China

Due to the increasingly close supply chain, trade, and investment linkages among enterprises, external shocks not only directly impact target firms but also exert significant indirect effects on affiliated enterprises along the supply chain. This paper takes the US Entity List sanctions against Chinese entities as a case study to empirically examine the impact of export controls on the stock price volatility of Chinese affiliated enterprises. The results indicate that US export controls significantly exacerbate stock price volatility among Chinese affiliated enterprises, exerting a notable adverse impact. This effect is more pronounced for smaller-scale, highly liquid, low R&D intensity, and non-foreign-invested affiliated enterprises. Mechanism analysis reveals that three factors play critical roles in transmitting this impact: the risk-taking capacity of affiliated enterprises, supply chain concentration, and investor confidence. Specifically, higher risk-taking capacity and diversified supply chain structures mitigate the adverse effects, while lower risk-taking capacity and concentrated supply chains intensify them; investor confidence functions as a transmission channel amplifying the negative impacts. Further analysis using a Difference-in-Differences-in-Differences (DDD) model shows that amid intensified export controls, the stock price volatility of affiliated enterprises in the high-tech sector is more severe. For high-tech enterprises, government subsidies effectively mitigate these adverse effects; however, higher risk-taking capacity intensifies the negative impacts (whereas lower risk-taking capacity mitigates them), and the intensifying effect of supply chain concentration as well as the transmission effect of investor confidence become statistically insignificant. By integrating export controls and the stock price dynamics of affiliated enterprises into a unified analytical framework, this paper provides important micro-level evidence and policy implications for Chinese enterprises to effectively respond to the indirect impacts of external shocks, thereby facilitating capital market stability and high-quality economic development.