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Ownership Structure and Corporate Diversification

  • Zhang Yi

    (Peking University)

  • Li Xi

    (Peking University)

Registered author(s):

    This paper examines the motivation and impact of corporate diversification in Chinese listed firms. We find that in local government owned-firms there is a non-linear relationship between the level of firm diversification and state ownership. As state ownership increases from zero, the level of diversification decreases. After state ownership reaches a certain level, the level of diversification increases as state ownership increases. There is no evidence that ownership is related to corporate diversification in non-state-owned firms or central government-owned firms. We also document that diversification is negatively related to firm performance in local government-owned firms. However, there is no evidence that diversification is negatively related to the firm performance in non-state-owned firms or central government-owned firms. Our findings suggest that agency problems are responsible for local government owned-firms taking value-reducing diversification strategies.

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    File URL: http://www.degruyter.com/view/j/bap.2006.8.1/bap.2006.8.1.1144/bap.2006.8.1.1144.xml?format=INT
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    Article provided by De Gruyter in its journal Business and Politics.

    Volume (Year): 8 (2006)
    Issue (Month): 1 (April)
    Pages: 1-21

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    Handle: RePEc:bpj:buspol:v:8:y:2006:i:1:n:4
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