Political connections and corporate diversification in emerging economies: Evidence from China

• Main Authors: LI, Weiwen, HE, Ai, LAN, Hailin, YIU, Daphne W.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Corporate diversification; Resource-based view; Political connections; Emerging economy; Business and Corporate Communications; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7323; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8322/viewcontent/Political_connections.pdf
• Institution: Singapore Management University

Drawing upon the resource-based view, this study examines how political connections affect corporate diversification in an emerging economy. Data from a sample of 1,280 Chinese public firms over 2002-2005 show a strong positive relationship between political connections and corporate diversification. We also find that the positive relationship between political connections and corporate diversification is moderated by the level of state ownership in firms and the level of regional institutional development. Theoretical and managerial implications are discussed.