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Diversification and Corporate Performance: Evidence from China’s Listed Energy Companies

Qiming Li (), Wenhuan Wang (), Yiping Lou (), Ke Cheng () and Xiaoguang Yang ()
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Qiming Li: School of Business Administration, China University of Petroleum, No. 18 Fuxue Road, Changping District, Beijing 102249, China
Wenhuan Wang: School of Business Administration, China University of Petroleum, No. 18 Fuxue Road, Changping District, Beijing 102249, China
Yiping Lou: School of Business Administration, China University of Petroleum, No. 18 Fuxue Road, Changping District, Beijing 102249, China
Ke Cheng: School of Business Administration, China University of Petroleum, No. 18 Fuxue Road, Changping District, Beijing 102249, China
Xiaoguang Yang: School of Business Administration, China University of Petroleum, No. 18 Fuxue Road, Changping District, Beijing 102249, China

Sustainability, 2016, vol. 8, issue 10, 1-17

Abstract: Recently, China’s energy industry has been continuously depressed due to a slowdown in its economic development. China’s energy companies have made considerable efforts to promote their corporate performance to mitigate this performance decline and to ensure the sustainable development of China’s energy industry, macro economy, society and environment. In this paper, the effects of two business strategies—industrial diversification and international diversification—on the performance of listed energy firms are empirically investigated. The empirical results show the following: (1) industrial diversification hinders corporate performance; (2) for industrially-diversified energy companies, related diversified strategies are more effective than unrelated diversified strategies; and (3) international diversification improves the performance of renewable energy firms, but hinders the performance of conventional energy firms. These results suggest that as economic conditions are not currently optimal, China’s energy companies should pay more attention to their main businesses and generate more products to satisfy market demand.

Keywords: industrial diversification; international diversification; corporate performance; sustainable development; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2016
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