Corporate Governance, Diversification Strategy, And Corporate Performance

Diversification is one of most important strategic decisions for corporate. However, the causes and effects of diversification still puzzle researchers. This paper empirically explores the relation between corporate performance, corporate governance and corporate diversification.The evidences from 231 China's listed companies show that corporate performance(ROA, ROE) and corporate diversification are negatively related. The study also find that the level of diversification is significant negatively related to the proportion of state shares and the ownership concentration, and positively related to the proportion of tradable A shares and the proportion of board ownership. Moreover, the results show that there is a quadratic-liner relation between the proportion of legal person shares and the level of corporate diversification. However, we find that the size of board, the proportion of independent directors, the proportion of management directors and the leadership structure of board are not statistically significant in influencing diversification strategy choice.