Financial Openness and Corporate Resilience: Evidence from China

We investigate the effect of financial openness on corporate resilience. Corporate resilience metrics refer to the processes through which firms respond to crises, encompassing the capabilities developed during adaptation, absorption, innovation, recovery, and development. Using dynamic difference-in-differences (DID) models and panel data on Chinese A-share listed firms from 2009 to 2022, we found that firms included in the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect (SSHK) lists exhibited higher levels of corporate resilience after the openness. Introducing foreign ownership and improving the quality of information disclosure are two plausible pathways through which financial openness can promote corporate resilience. At the same time, the degree of industry competition and level of external financing dependence moderate the results. Importantly, corporate resilience moderates the positive long-term effect of financial openness on firms’ total factor productivity (TFP). These findings highlight that fostering corporate resilience is not merely an outcome but a critical condition for translating financial integration into sustainable productivity gains, enlightening resilience-oriented policymaking in emerging markets undergoing reform.