Sanctions Shocks, Corporate Debt Financing Costs, and Coping Strategies: Evidence from the US Unilateral Control List against China
DOU Chao, LI Mengjia, LIU Wei, YANG Xue
School of Business, Central University of Finance and Economics; School of Economics and Management, Beijing Jiaotong University; School of Accounting, Tianjin University of Finance and Economics
Summary:
In recent years, the United States has continuously escalated and intensified its sanctions against China, exerting substantial negative impacts on the regular operation, strategic decision-making, and sustainable development of Chinese enterprises. These sanctions, ranging from export restrictions and investment prohibitions to technology bans, have created a complex and uncertain external environment for Chinese firms. In this context, an important yet underexplored question arises: to what extent have Chinese firms been affected by US sanctions, and through which channels can they mitigate such adverse impacts？ Addressing these questions is essential not only for understanding the micro-level financial consequences of international sanctions but also for evaluating the effectiveness of domestic policy interventions aimed at stabilizing corporate financing and maintaining economic resilience. This study systematically identifies Chinese A-share listed firms exposed to US sanctions between 2003 and 2021, based on sanction announcements issued by various departments of the US federal government—such as the Department of Commerce, the Department of the Treasury, and the Department of State—and matches these with firm-level financial and ownership data. By constructing a comprehensive and matched firm-level dataset that integrates sanction information with corporate financial characteristics, this paper empirically investigates the causal impact of US sanctions on firms' debt-financing costs and explores the potential mitigating effects of government policy responses. The empirical design relies on a difference-in-differences framework, enabling robust identification of the sanction shock effects while additionally controlling for firm fixed effects and industry-specific trends. The empirical results reveal that exposure to US sanctions significantly increases corporate debt financing costs. This implies that sanctions tighten credit conditions and heighten risk perceptions among investors and financial institutions, thereby increasing firms' financing pressure. Meanwhile, the study also finds that proactive government responses—such as fiscal subsidies, industrial support programs, tax relief measures, and preferential loan policies—can effectively alleviate the surge in financing costs induced by sanctions. These results highlight the critical role of domestic policy interventions in cushioning external shocks and stabilizing firms' financing environments under conditions of international geopolitical uncertainty. Further heterogeneity analyses show that the magnitude of the sanction effect on debt financing costs varies significantly across firms depending on several key characteristics. Specifically, firms facing high-intensity sanctions or maintaining close ownership ties with sanctioned entities experience more pronounced increases in financing costs. Conversely, enterprises with higher audit quality or stronger product competitiveness are better positioned to resist the negative effects of sanctions. These firms tend to signal greater information transparency and financial reliability to creditors, thereby reducing information asymmetry and enhancing market confidence. Mechanism analyses further demonstrate that US sanctions primarily increase debt financing costs through the deterioration of market perception rather than direct. Sanctions act as a negative external signal that amplifies information asymmetry and undermines investors' and lenders' confidence in the sanctioned firms' creditworthiness. This erosion of trust elevates perceived risk, leading to higher required risk premiums and tighter financing constraints. Hence, the transmission mechanism operates not only through trade and investment restrictions but also through the reputational and informational channels embedded in capital markets. Overall, this study makes several contributions to the existing literature. First, it provides systematic empirical evidence on how international economic sanctions affect firm-level debt financing costs in the context of an emerging economy, filling an important research gap at the intersection of international political economy and corporate finance. Second, it identifies the crucial role of domestic policy countermeasures in mitigating the financial consequences of sanctions, thereby offering policy insights for enhancing economic resilience and maintaining financial stability. Third, by uncovering the role of market perception as a key transmission mechanism, the paper enriches the understanding of how geopolitical shocks are internalized within domestic capital markets. Taken together, these findings shed new light on the dynamic interactions between external shocks, corporate financing conditions, and government intervention, offering valuable implications for policymakers, regulators, and corporate managers seeking to navigate the complex landscape of global economic sanctions.
窦超, 李梦佳, 刘巍, 杨雪. 制裁冲击对企业债务融资成本的影响及应对措施——基于美国对华管制清单的研究[J]. 金融研究, 2026, 547(1): 38-56.
DOU Chao, LI Mengjia, LIU Wei, YANG Xue. Sanctions Shocks, Corporate Debt Financing Costs, and Coping Strategies: Evidence from the US Unilateral Control List against China. Journal of Financial Research, 2026, 547(1): 38-56.
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