Government control, diversification and corporate performance

In this paper, we have analyzed the relationship among government control, diversification and corporate performance. The investigation has been performed using panel data procedure for a sample of 320 Chinese companies listed on the Shanghai Stock Exchange during the period from 2001 to 2006. We find that, diversification under government control has negative influence on firm performance, while the relationship between specialization under government control and performance is not statistically significant. This suggests that diversification under government control should decrease corporate performance.