SOAS Research Online

Abstract

This thesis examines the impact of two international crises, namely the China–US trade war and the COVID-19 pandemic, on the corporate investment, financial risk, and strategic management of Chinese listed companies in recent years. First, the thesis examines the impact of international trade disputes on investment behaviours. The empirical results show that during the trade war period, firms are likely to reduce their fixed investment and their investment activities are influenced by fluctuating demand and uncertain trade conditions. In addition, the investments of export-oriented firms during this period are more sensitive to financial constraints than those of less export-oriented companies, whose investment is more responsive to changes in customer demand. Second, this thesis comprehensively examines the impact of the China–US trade war on the correlation between earnings management strategies and the cost of capital. The empirical findings confirm that executives are more likely to manipulate reported earnings through real earnings management than accrual-based earnings management during the trade war period. These findings also indicate that government policies and industry characteristics affect the extent of fundraising from the capital market during the trade war period. Third, this thesis explores the role of managerial ability in effective risk management and its impact on the cost of raising funds from the capital market. The main finding is that high-ability managers develop operations strategies to avoid financial risks. The empirical results reveal that although high-ability managers pursue private benefits under financial constraints, thereby increasing financial risk, they also help their firms avoid financial risk during demand fluctuations. Finally, this thesis demonstrates that earnings management is a potential channel through which managerial ability affects enterprise financial risk. Overall, this thesis contributes to the literature by providing new and valuable findings regarding the investment behaviour, financial risk, and strategic management of Chinese listed firms that both contrast with and complement the literature. Finally, the thesis notes that given China’s growing influence on the global economy, policymakers should exercise caution when helping companies to ‘weather the storm’ to promote sustainable economic growth.