Research on the Impact of Domestic Substitution on Company Valuation

ABSTRACTFacing the technological blockade from Western countries, Chinese enterprises urgently need to break through the monopoly of key technologies and accelerate the process of domestic substitution to enhance the security, stability, and reliability of the industrial chain. However, domestic substitution is not only an industrial policy and strategic choice but also directly related to the profitability and valuation level of enterprises. This paper selects all A-share listed companies from 2020 to 2023 as sample data to verify the relationship between domestic substitution and enterprise valuation. The research findings indicate that the valuation level of enterprises in industries undergoing domestic substitution is significantly higher than that of enterprises in non-domestic substitution industries. Meanwhile, the proportion of R&D expenses, the introduction of the "CHIPS Act" and the state-owned enterprise status of the company positively moderate the impact of domestic substitution on enterprise valuation. This paper provides a systematic and empirical study on the relationship between domestic substitution and the valuation of listed companies, filling the gap in existing literature and offering a new perspective on how domestic substitution affects enterprise valuation, which is highly enlightening for corporate strategies.