Geopolitical Risks and the Vulnerability of Multinational Listed Firms: Evidence from U.S.-Listed Chinese Companies during the Trade War

Geopolitical risks have become an important determinant of financial market outcomes, shaping firm performance and risk. However, firm-level evidence remains limited for firms exposed to multiple institutional environments, where transmission mechanisms differ from those in purely domestic markets. This study explores how geopolitical risks reshape the risk-return profile of multinational listed companies by analyzing U.S.-listed Chinese companies during the U.S.-China trade war. Using a quasi-experimental design with propensity score matching and difference-in-differences, we find that the trade war led to a significant decline in returns and an increase in volatility of the U.S.-listed Chinese companies. Two key channels of vulnerability are identified: (1) home country bias exacerbates spillovers from trade war, and (2) political transmission uncertainty is significantly higher in the listing countries than in the home country. Our results reveal a paradoxical market response: while financially robust companies exhibit greater return stability, they also experience heightened volatility. These findings highlight the vulnerability of cross-listed firms to geopolitical risks and underscore the role of dual institutional exposure in shaping market outcomes.