Purpose - This paper provides a systematic comparison of the level of business diversification in China and eight other large economies for the 2001 to 2005 period. We investigate reasons why Chinese firms are more diversified than companies elsewhere.Design/methodology/approach - We collect...

We examine the diversification patterns of almost all publicly listed non-financial companies in China during the 2001 to 2005 period. More than 70 percent of the firms in our sample are diversified. We document that patterns of diversification strongly depend on firms' political connections....

Where legal systems and market forces enforce contracts inadequately, vertical integration can circumvent these transaction difficulties. But, such environments often also feature highly interventionist government, and even corruption. Vertical integration might then enhance returns to political...