Type Of Diversification And Performance Of Companies

Diversification has been a hot issue in the sector of company finance for half a century, but, until now there still exist lots of different opinions, such as, whether diversification do goods or harms to company performance; why some companies can make fruits with good performance via diversification while some companies can not. This paper will make theoretical analysis and empirical study of domestic enterprises in the field of diversification, explore the relationships between type of diversification, performance and governance structure, to make helpful suggestions and offer valuable reference for the domestic enterprises.This paper initially makes the definition and type of diversification, and sums up the motive and influential factors of diversification, and makes a review of relevant papers and documents to conduct a theoretical analysis of the relationship between diversification and company performance, and the influence of company governance structure on diversification. Then on the basis of theoretical analysis, this paper applies GLS multi-linear regression analysis of pooled data of Shanghai stock market index 180 in 2002-2004 to make empirical study of the correlation between diversification category and performance, with the result showing that there is significant positive correlation between correlate diversification and performance, insignificant correlation between uncorrelate diversification and performance, and there exists insignificant correlation between the performance of those companies conducting diversification and correlate diversification degree. And then, this paper makes three-factor logit model and selects five indexes of share right and board structure to conduct regression to analyze the influence on diversification category of these five indexes, and draws the conclusion that the companies with high share right centralization degree will more likely choose correlate diversification; companies with high share hold ratio of super management board will more likely choose diversification, but there is no significant preference for correlate diversification or uncorrelate diversification; companies with large-scale board will not have significant tendency to choose diversification, but in these companies conducting diversification, companies with large-scale board will more likely choose uncorrelate diversification; companies with share-hold board member ratio will not have significant tendency to choose diversification, but in these companies conducting diversification, companies with share-hold board member ratio will more likely choose...