Government intervention in investment by Chinese listed companies that have diversified into tourism

This paper presents the outcome of empirical research into the influences of government intervention on tourism investment using a sample of Chinese listed companies that have diversified into the tourism sector. Government intervention is measured on the basis of the CEO’s political connections, the relationship between the government and the market, and the degree of financial market development. The results show that state-owned enterprises (SOEs) with strong political connections are likely to diversify into the tourism industry, especially in the area in which the government intervenes in the market excessively and the financial market is well-developed, although the tourism businesses of these firms tend to operate poorly after diversification. Amongst non-SOEs, in contrast, government intervention factors are not found to facilitate diversification into the tourism sector to any significant degree. Less government intervention is found to be beneficial for these firms, allowing them to improve their performance in the tourism sector. It is thus concluded that greater local government awareness of policy implementation is necessary to avoid unfair competition between SOEs and non-SOEs and to target the long-term positive development of the Chinese tourism sector.