Author(s)

Shuangjie Li, Zhongyi Li

Corresponding Author

Zhongyi Li

ABSTRACT

This paper constructs a “quasi-natural experiment” using the impact of the “Textbook Event” in Japan in 2005 as the exogenous shock, examining the impact of political friction on stock prices of listed companies in China and exploring the internal transmission mechanism. The study finds that political friction between China and Japan has a negative impact on stock prices of Chinese listed companies trading with Japan. This effect is proven to be robust when accounting for a variety of robustness tests. The in-depth exploration of the transmission mechanism based on the mediating effect model finds that global value chains linkages are an important channel by which political friction influences stock prices.

KEYWORDS

“Textbook Event”, Global Value Chains Linkages, Stock Price Volatility, “Quasi-natural Experiment”