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Diversification of Chinese companies: an international comparison

Joseph P.H. Fan (School of Business Administration, Chinese University of Hong Kong, Shatin, Hong Kong, People's Republic of China)
Jun Huang (School of Accountancy, Shanghai University of Finance and Economics, Shanghai, People's Republic of China)
Felix Oberholzer‐Gee (Harvard Business School, Boston, Massachusetts, USA)
Troy D. Smith (Harvard Business School, Boston, Massachusetts, USA)
Mengxin Zhao (Department of Finance, Bentley College, Waltham, Massachusetts, USA)

Chinese Management Studies

ISSN: 1750-614X

Article publication date: 11 April 2008

Abstract

Purpose

The purpose of this paper is to provide a systematic comparison of the level of business diversification in China and eight other large economies for the 2001‐2005 period. The reasons why publicly listed Chinese firms are more diversified than companies elsewhere are investigated.

Design/methodology/approach

Data were collected on the number of business segments in which publicly traded companies operate from the Thomson One Banker database and analyzed using non‐parametric tests and regression analysis.

Findings

The mean number of business segments per firm varies significantly by country. Notably, there is no evidence in the authors' sample that emerging‐market companies are systematically more diversified than their developed‐market counterparts. In most countries, firms have become less diversified over time. However, there is no such trend in China. The level of diversification of Chinese enterprises does not vary over the authors' study period (2001‐2005), making Chinese firms the most diversified in the sample by 2005. China's growth rate does not seem to explain the higher level of firm diversification. However, the authors find that Chinese state‐owned enterprises (SOEs) diversify their operations more aggressively than other Chinese firms.

Research limitations/implications

Ownership data and business group affiliations were not available for all firms in the sample, making it difficult to control for these effects across economies. The study's findings are limited to publicly traded firms.

Practical implications

Government involvement in SOEs may be contributing to a divergence in the pattern of business diversification between China and other economies.

Originality/value

This paper quantifies anecdotal evidence that Chinese firms are more diversified than similar firms in other countries.

Keywords

Citation

Fan, J.P.H., Huang, J., Oberholzer‐Gee, F., Smith, T.D. and Zhao, M. (2008), "Diversification of Chinese companies: an international comparison", Chinese Management Studies, Vol. 2 No. 1, pp. 6-13. https://doi.org/10.1108/17506140810866223

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited