Relevant Research On Corporate Diversification And Long-term Profitability

Corporate diversification problems always are concentrated by enterprises and academics. According to the latest researches about relation between diversification and business performance, some scholars consider diversification positive to business performance, while some think they are negatively related, even some find that they are unrelated. Therefore, it is an opportunity to this paper for further discuss because of opposite viewpoints above. The author realizes that it has outstanding significance on Chinese companies at transition economy, if putting diversification and long-term profitability together for further study.The paper investigates the impact of diversification on long-term profitability with the samples of listed companies in china by 2000-2004 periods. Firstly, the paper establishes a set of long-term profitability system by questionnaire; secondly, the paper proposes four hypotheses from the aspects of operating modes, company size, diversified level and industry relevance respectively. Thirdly, the paper verifies the hypotheses by creating simple linear regression model. Finally, based on strategy goal, the paper tries to give some diversified developing routes around long-term profitability and suggestions from the point of company life circle.The paper shows that operating modes themselves make no difference to long-term profitability. The paper also indicates that company size and industry relevance have positive effect on long-term profitability, while diversified level is negative. And, the paper does not find that turn point between company size and long-term profitability has occurred, which is not the same as hypothesis.