Diversification and Value of Shanghai-Listed Manufacturing Companies

20 Pages Posted: 11 Jul 2005

See all articles by Jiong Jin

Jiong Jin

Independent

J. Henk von Eije

University of Groningen - Faculty of Economics and Business

Date Written: July 15, 2005

Abstract

Using the information from the Shanghai-listed manufacturing firms, we find an increase in diversification over the period 2001-2003. The question may then be raised whether this benefits shareholders. Though researchers of developed countries find a negative effect of diversification, it may benefit shareholders in emerging markets. In our sample the diversified firms have lower market-to-book values of equity and lower Tobin's q's. Moreover multiple panel regressions with lagged corrections for interdependence all result in negative and often significant coefficients. Positive value effects of diversification that might be expected in the Chinese emerging market thus do not compensate for the negative effects in the manufacturing firms listed at the Shanghai Stock Exchange.

Keywords: Diversification, firm value, China, manufacturing firms, Shanghai Stock Exchange

JEL Classification: G32, G15

Suggested Citation

Jin, Jiong and von Eije, J. Henk, Diversification and Value of Shanghai-Listed Manufacturing Companies (July 15, 2005). Available at SSRN: https://ssrn.com/abstract=675804 or http://dx.doi.org/10.2139/ssrn.675804

Jiong Jin

Independent ( email )

J. Henk Von Eije (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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