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Article: Industrial diversification, partial privatization and firm valuation: Evidence from publicly listed firms in China
Title | Industrial diversification, partial privatization and firm valuation: Evidence from publicly listed firms in China |
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Authors | |
Keywords | Diversification Partial privatization Political costs Corporate governance China |
Issue Date | 2008 |
Publisher | Elsevier. The Journal's web site is located at http://www.sciencedirect.com/science/journal/09291199 |
Citation | Journal of Corporate Finance, 2008, v. 14 n. 4, p. 405-417 How to Cite? |
Abstract | This paper investigates the relationship between industrial diversification and firm valuation in a sample of 816 publicly listed firms in China. It contributes to the literature in three ways. First, it is one of the first studies of diversification and firm value in an emerging market dominated by partially privatized firms. Second, it explores the determinants of corporate diversification by considering some unique aspects of the agency and political conflicts inherent in China's transition toward a market economy. Third, it employs a number of empirical methodologies (instrumental variables estimation, the Heckman self-selection model, and propensity score matching) to examine the relationship between diversification and firm value. The paper finds that when the decision to diversify is modeled as an endogenous choice based on firm characteristics, multi-segment firms have significantly higher Tobin's q than single-segment firms, even after controlling for factors such as ownership structure, ownership concentration, and growth opportunities. In addition, government-controlled multi-segment firms have lower Tobin's q than non-government-controlled multi-segment firms, providing evidence in support of the political cost hypothesis of diversification. Moreover, non-government-controlled firms in growth industries that perform better are more likely to diversify. Overall, our results illustrate that the valuation effect of diversification depends on government control. |
Persistent Identifier | http://hdl.handle.net/10722/192326 |
ISSN | 2023 Impact Factor: 7.2 2023 SCImago Journal Rankings: 3.182 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Lin, C | en_US |
dc.contributor.author | Su, D | en_US |
dc.date.accessioned | 2013-10-24T01:49:57Z | - |
dc.date.available | 2013-10-24T01:49:57Z | - |
dc.date.issued | 2008 | en_US |
dc.identifier.citation | Journal of Corporate Finance, 2008, v. 14 n. 4, p. 405-417 | en_US |
dc.identifier.issn | 0929-1199 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/192326 | - |
dc.description.abstract | This paper investigates the relationship between industrial diversification and firm valuation in a sample of 816 publicly listed firms in China. It contributes to the literature in three ways. First, it is one of the first studies of diversification and firm value in an emerging market dominated by partially privatized firms. Second, it explores the determinants of corporate diversification by considering some unique aspects of the agency and political conflicts inherent in China's transition toward a market economy. Third, it employs a number of empirical methodologies (instrumental variables estimation, the Heckman self-selection model, and propensity score matching) to examine the relationship between diversification and firm value. The paper finds that when the decision to diversify is modeled as an endogenous choice based on firm characteristics, multi-segment firms have significantly higher Tobin's q than single-segment firms, even after controlling for factors such as ownership structure, ownership concentration, and growth opportunities. In addition, government-controlled multi-segment firms have lower Tobin's q than non-government-controlled multi-segment firms, providing evidence in support of the political cost hypothesis of diversification. Moreover, non-government-controlled firms in growth industries that perform better are more likely to diversify. Overall, our results illustrate that the valuation effect of diversification depends on government control. | - |
dc.language | eng | en_US |
dc.publisher | Elsevier. The Journal's web site is located at http://www.sciencedirect.com/science/journal/09291199 | - |
dc.relation.ispartof | Journal of Corporate Finance | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.rights | NOTICE: this is the author’s version of a work that was accepted for publication in <Journal of Corporate Finance>. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL 14, ISSUE 4, (2008)] DOI 10.1016/j.jcorpfin.2008.05.001 | - |
dc.subject | Diversification | - |
dc.subject | Partial privatization | - |
dc.subject | Political costs | - |
dc.subject | Corporate governance | - |
dc.subject | China | - |
dc.title | Industrial diversification, partial privatization and firm valuation: Evidence from publicly listed firms in China | en_US |
dc.type | Article | en_US |
dc.description.nature | preprint | - |
dc.identifier.doi | 10.1016/j.jcorpfin.2008.05.001 | en_US |
dc.identifier.scopus | eid_2-s2.0-50049093500 | en_US |
dc.identifier.volume | 14 | en_US |
dc.identifier.issue | 4 | en_US |
dc.identifier.spage | 405 | en_US |
dc.identifier.epage | 417 | en_US |
dc.identifier.isi | WOS:000259831600007 | - |
dc.identifier.issnl | 0929-1199 | - |