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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.
Additional information
Funding
Min Zhang acknowledges the financial support of the National Nature Science Fund of China (No. 71002032) and the Research Funds of Renmin University of China (11XNJ006, 11XNK030). Jun Su acknowledges the financial support of the National Nature Science Fund of China (No. 71102118) and of the Collaborative Innovation Centre for State-Owned Assets Administration of Beijing Technology and Business University (GZ20130801).