| Summary: | ABSTRACT
This study conducts the relationship between diversification and corporate performance in the People’s Republic of China (PRC)’s business environment. Diversification continues to be an important strategy for corporate growth and better performance. Most of the previous studies on the same topic are reviewed in developed economies, they addresses a negative relationship between diversification and corporate performance. The objective of this study is to investigate the diversification- performance relation in the case of China. Based on the majority of existing researches, a negative relationship between the level of diversification and firm performance in China is expected. A sample of 100 enterprises has been categorized non-diversified, moderately diversified and highly diversified. For these firms, the corporate performance has been measured by Return on Assets (ROA), Return on Equity (ROE) and Market Return Ratio (MVR); the level of diversification degree has been analyzed by Specification Rate (SR). However, the hypothesis doesn’t been supported by empirical evidences, discovering that, firm performance is positively related to the level of diversification. Managerial implication and future research are discussed.
Key words: diversification; corporate performance; strategy
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