Abstract
Purpose: Diversified business groups have become active players in
Chinese economy in the recent years. While several studies have been
conducted to examine the role of external factors such as market
imperfection on firms' decisions to diversify, relatively few efforts
have been made to investigate the impact of internal factors such
as ownership structures on such decision. Building on agency theory,
this paper attempts to examine the impacts of ownership type and
ownership concentration on Chinese business groups' diversification
strategies. Design/methodology/approach: Year 2000 annual reports
of publicly traded companies on Shenzhen Stock Exchange were used
to identify business groups and collect data. Multiple regression
analysis was used to conduct the data analysis. Findings: The results
indicate that compared to other ownership structures, government-owned
business groups tend to be more diversified, while ownership concentration
seems to be related to lower levels of diversification. Industry
membership also plays a significant role, but previous performance
is not significantly related to diversification levels. Implications
and future study directions are also discussed. Originality/value:
This study contributes to the understanding of the impact of ownership
structure on companies' diversification strategies in a transitional
economy such as China. © Emerald Group Publishing Limited.
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