Does being included in an entity list enhance regulated firms’ mergers and acquisitions? Evidence from Chinese high-tech firms

Abstract

Using a sample of Chinese high-tech firms, we document that firms included in the entity list by the U.S. enhance their mergers and acquisitions (M&As) investments. Mechanism tests indicate that the inclusion of Chinese firms in the entity list has disrupted their reliance on imported factors of production, thereby motivating their M&A decisions that aim to secure resources. Additional tests show that being included in the entity list motivates firms to enhance specific types of M&As such as technological and domestic M&As. Meanwhile, national industrial policy plays an important role in supporting these firms’ M&As.