An Empirical Study On The Relationship Between Diversification And Performance In Listed Companies Of China

"Does corporate diversification create firm performance?"This issue has caused wide public concern all over the world. Although theorists have not reached consistent results, more and more research found that diversification results in a decrease in performance. As the facts shown, in USA, Japan, Korea and many other developed countries, there is a trend indicating the regression from diversification to specialization. Whether diversification in our country can improve firm performance or does some damage to value? Based on the Western research and the practice in China, I try developing empirical approach to study diversification's effect on firm performance in China's securities market and try to find the reasons that can explain it properly.In the first part of this paper, the theories of diversification and firm performance are reviewed and the benefits of diversification are analyzed against costs. Based on the theories, this paper summarized the diversification empirical research at home and abroad.Then this paper chooses 203 listed companies in A stock market and dose an empirical research on the relationship between diversification and performance in our country. The conclusions are as following: There is a negative correlation between diversification and firm performance. According to the result of empirical research, author analyzes the historical background of diversification in our country and the reasons for the negative correlation between diversification and performance.In the last, this paper puts forward some policy suggestions. For example, companies should regress from diversification to specialization and enhancement core competitive ability. At the same time, this paper pointed out the direction of further studying.