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Political Connections and Corporate Diversification: An Exploration of Chinese Firms

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  • Min Zhang
  • Jun Su
  • Yuefan Sun
  • Wen Zhang
  • Na Shen

Abstract

In this study, we explore the relationship between political connections and corporate diversification in China. We find that the diversification level of politically connected firms is significantly higher than that of non-politically connected firms. We further find that the relationship is stronger in non-state-owned enterprises and in areas in which government intervention is greater. This study enriches the corporate diversification literature by highlighting political connections as an important driver of corporate diversification in emerging markets. It also furthers our understanding of the institutional environment as a moderator of the relationship between political connections and firm diversification.

Suggested Citation

  • Min Zhang & Jun Su & Yuefan Sun & Wen Zhang & Na Shen, 2015. "Political Connections and Corporate Diversification: An Exploration of Chinese Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(1), pages 234-246, January.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:1:p:234-246
    DOI: 10.1080/1540496X.2015.1012400
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    Cited by:

    1. Li, Xiao-Lin & Li, Jingya & Wang, Jia & Si, Deng-Kui, 2021. "Trade policy uncertainty, political connection and government subsidy: Evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 99(C).
    2. Askarany, Davood & Spraakman, Gary, 2020. "Regional diversification and financial performance through an excess-capacity theory lens: A new explanation for mixed results," Technological Forecasting and Social Change, Elsevier, vol. 156(C).
    3. Changzheng Zhang & Jiao Zhang & Qian Guo, 2018. "Can Political Connections Of Independent Directors Improve Firm Perfomance? Evidence Of Chinese Listed Manufacturing Companies Over 2008 - 2013," Malaysian E Commerce Journal (MECJ), Zibeline International Publishing, vol. 2(2), pages 5-12, January.
    4. Sumon Kumar Bhaumik & Ali M. Kutan & Sudipa Majumdar, 2018. "How successful are banking sector reforms in emerging market economies? Evidence from impact of monetary policy on levels and structures of firm debt in India," The European Journal of Finance, Taylor & Francis Journals, vol. 24(12), pages 1047-1062, August.
    5. Tang, Oupin & Shi, Xiaomeng & Jiu, Lili, 2024. "Value creation or political trick? An event study on anti-ESG regulations," Finance Research Letters, Elsevier, vol. 65(C).
    6. Jakob Arnoldi & Yulia Muratova, 2019. "Unrelated acquisitions in China: The role of political ownership and political connections," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 113-134, March.

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