A Research On Diversification And Firm Performance

With regard to the relationship between diversification and corporate performance, a large number of foreign scholars did lots of researches. They have different opinions of the research——the relationship between diversification and corporate performance,some of them said that pluralism will have discounts, some of them thought that pluralism will produce a premium, and others believe that there had no significant relationship between the diversification strategy and performance of the company. So far, foreign academic circles have not yet agreed conclusions. China's enterprises began the ongoing diversification of investment from the 1980's, but after nearly 20 years of development and research process point of view, there is no uniform conclusion of national academic. Drawing on domestic and foreign scholars on the basis of research results, this paper on the above issue diversified listed companies in China to conduct theoretical research and empirical analysis, using the 209 manufacturing industries in Shanghai and Shenzhen stock market listed company financial data for the three years 2006-2008, combined with these companies to carry out diverse operations situation, diverse types and the relationship between corporate performance were discussed. Concluded as follows: 1, non-related diversification will reduce business performance and bring diversification discount. 2, related diversification will improve business performance and bring diversification premium. 3, the impact of related diversification on firm performance are more than the impact of non-related diversification on firm performance. 4, the performances of related diversification firms are better than the performances of non-related diversification firms. Based on the above Conclusions, the paper will provide some empirical basis and carry out some corresponding recommendations for the corporate investors and managers to make appropriate decisions.