Working Paper: NBER ID: w20089
Authors: Raymond Fisman; Yasushi Hamao; Yongxiang Wang
Abstract: We study the impact of nationalism and interstate frictions on international economic relations by analyzing market reaction to adverse shocks to Sino-Japanese relations in 2005 and 2010. Japanese companies with high China exposure suffer relative declines during each event window; a symmetric effect is observed for Chinese companies with high Japanese exposure. The effect on Japanese companies is more pronounced for those operating in industries dominated by Chinese state-owned enterprises, while firms with high Chinese employment experience lower declines. These results emphasize the role of countries' economic and political institutions in mediating the impact of interstate frictions on firm-level outcomes.
Keywords: Nationalism; Economic Exchange; Sino-Japanese Relations
JEL Codes: F13; F51; G14; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Adverse shocks to Sino-Japanese relations (F69) | Significant declines in the market value of Japanese firms with high exposure to China (F69) |
| Adverse shocks to Sino-Japanese relations (F69) | Significant declines in the market value of Japanese firms with high exposure to China mediated by the presence of SOEs (F23) |
| Presence of SOEs in relevant sectors (L59) | Increased vulnerability of firms to adverse shocks (F65) |
| High employment of Chinese workers (J82) | Less severe declines in market value of Japanese firms (G32) |
| Negative impact on Chinese firms following the Senkaku incident (F69) | Driven more by consumer sentiment than government intervention (D12) |