The resilience revolution: Will new securities laws Be corporate China's pressure test?

Abstract

In a era of increasing global economic instability—driven by pandemics, geopolitical conflicts, and market disruptions—enhancing company operational resilience has become essential for firm survival and economic stability. This paper examines the 2020 amended Securities Law in China, a significant reform that emphasizes transparency, investor protection, and market discipline. The research demonstrates that the law substantially enhances operational resilience through a difference-in-differences (DID) model, supported by robustness tests, mechanism analysis, and heterogeneity assessments. Essential routes encompass enhanced internal governance, characterized by more rigorous disclosures and accountability, as well as increased total factor productivity (TFP) through efficient capital allocation and a managerial emphasis on productivity. The law's effect is particularly significant for enterprises facing substantial financial limitations and those operating in competitive sectors, where regulatory improvements mitigate financing barriers and promote investments in resilience. This research advances institutional economics by linking capital market regulation to operational resilience, demonstrating how regulatory frameworks impact dynamic business capabilities. It emphasizes that effectively conceived regulatory reforms can serve as significant drivers of corporate resilience, providing practical guidance for policymakers and management seeking to promote sustainable and adaptive business practices during challenging periods.