Diversified business groups and corporate restructuring in China

Abstract

Purpose – This paper aims to explore the roles different ownership structures, the joint effect of related and unrelated diversification strategies, and previous performance levels have on the restructuring strategies of such firms.Design/methodology/approach – Annual reports of publicly traded firms in the two Chinese stock exchanges are used to collect data. Multiple regression and ANOVA analysis are used to examine the impact of ownership structure types, match between diversification strategies, and previous performance on the change of business scopes of the sample business groups.Findings – Compared to other ownership types, government owned business groups tend to increase their business scope during asset restructuring, while private business groups tend to decrease their scopes through divestitures and spinoffs. Poor previous performance is also found to be negatively related to change in business scopes. The “match” between related and unrelated diversification strategies of the business groups ...