An Empirical Research On Diversification And Firm Performance Of Chinese Public Companies

Using a sample of 579 Chinese listed companies during the 2003-2005 periods, this paperexamines the effect of diversification on firm performance. We found, from the whole,diversification can not improve firm performance, but deteriorate firm performance. It has nosignificant influence on market performance, and has negative influence on financialperformance. Furthermore, it conclude that the effect of diversification on firm performance issignificantly different among industries for theirs character. So, this dissertation studies thefactors affecting firm diversification to find why the effect of diversification on firmperformance exists significant different among industries. It concludes that ROA,firm scale,theratio of asset and debt,hold ratio of the largest shareholder,the character of the largestshareholder and the age of the firm have different influence on different industries. So, itpresumed that it is the different affecting factors that lead to diversification have significantlydifferent effect on firm performance.