Diversification and Corporate Performance

There is a link between diversification and corporate performance. Read this article to find out how they relate to one another.

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

Source: Qiming Li, Wenhuan Wang, Yiping Lou, Ke Cheng, and Xiaoguang Yang, https://www.mdpi.com/2071-1050/8/10/983/htm
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