Navigating Export Controls: How Chinese M&A Respond to the U.S. Entity List

The U.S. Entity List restricts targeted firms' access to critical inputs and technologies, which can affect their investment decisions. Using firm‐level data from Bureau van Dijk's Orbis and Zephyr databases from 2011 to 2023, we examine the impact of the U.S. Entity List on the mergers and acquisitions (M&A) activities of Chinese firms. We find that U.S. Entity List inclusion has a negative and significant impact on the number and value of targeted firms' M&A deals. Our results are robust to various confounding factors, alternative M&A measures, and estimation methods. The effect is heterogeneous: the decline in M&A activity is less pronounced among firms with lower reliance on U.S. imports and among firms located in eastern regions. The mechanism analysis shows that the Entity List has increased uncertainty and intensified firms' financial constraints. Moreover, the inclusion reduces the share of M&A in the Western bloc countries. Our findings offer valuable insights for firms and policymakers navigating the challenges of rising protectionism and geopolitical risks.