A Research On Corporate Governance And Firm Diversification

Both domestic and international empirical researches and cases have demonstrated that diversification destroyed firm value,but managers and controlling shareholder can take private benefits through diversification that does not necessarily increase corporate value,what provide opportunities for the controlling shareholder and managers'self-interest behavior.Our empirical research results show that: in ownership structure, there is a strong negative correlation between the ownership concentration and the propensity of diversification; the percentage of state-owned shares and corporation stocks is inversely related to the propensity of diversification, but the correlation is not very significant; in board of directors governance, the scale of the board and the percentage of independent directors as well as CEO duality is related to the propensity of diversification, but the correlation is not very significant;there is strong nagative correlation between the number of board's meeting and diversification;in compensation incentives, the ratio of manager shareholdings is not significately related to the propensity of diversification significantly; in debt financing, the debt ratio is inversely related to the propensity of diversification. This research conclusion shows that the existence of state-owned shares and corporation stocks in listed companies can't effectively restrain the optimal decision of management. The ownership concentration suppress the diversification,but there may be just chose the encroachment of other more enconomical way.The board perform their monitoring duty ineffectively.This study explores the influence of corporate governance on diversification both theoretically and empirically, and checks the agent perspective of diversification causes, which contributes to the researches on diversification. Also, this study analyzes the efficiency of corporate governance from a new perspective of corporate investment decisions, which is also a new explore to corporate governance.