An Empirical Study On Board Structure, Product Diversification And Performance Effects

Product diversification is an important part of corporate strategy and is also one of common development strategies and effective mean for large enterprises to be industrial leader around the world. However, with the emerging of failures, domestic and foreign scholars have raised many questions about product diversification. How to build an effective corporate governance mechanism of resolving the problems of product diversification, has become the diverse focus of academic research. The board of directors is at the core position in the system of corporate governance. Board of directors have the decision-making power of appointing master manager, major investments, mergers and acquisitions and a series of major events, as well as supervision of managers. They will have a significant impact on the company' management and operation. If the board want to improve the efficiency of decision making and playing an active role of supervision, its structure is one of the most important factors. Reasonable and complementary board structure can ensure implementation of the company's board of directors to obtain a lasting interest in strategies to maximize the representative of the interests of stakeholders.Firstly, this paper discuss the board structure, by the bases of classification of internal and external structure of the board of directors, outside directors including independent directors, interlocking directorates, inside directors is mainly about executive director. Secondly, based on principal-agent theory, corporate governance theory, resource dependence theory and the theory of modern housekeeper, from a theoretical perspective, this paper analyze the relationship between board structure and product diversification, the influence of board structure on the firm performance of product diversification and propose hypothesis. Thirdly, this paper uses the2008-2010data from listed companies in the manufacturing sector as a research sample. And build the model of board structure and product diversification, the influence of board structure on the firm performance of product diversification. The conclusions of this study get from examining empirical regression analysis from the perspective of independent directors, interlocking directors, inside directors respectively. Finally, after a theoretical analysis and empirical testing, this paper draw the following conclusions:A company of higher proportion of independent directors will has relatively lower level of product diversification and independent directors will has a significant positive adjustment effect of regulation on the performance of product diversification; There is a positive relationship between interlocking directors and the degree of product diversification. Besides, the ratio of interlocking directors has a significant negative adjustment effect of regulation on the performance of product diversification; Executive directors can effectively inhibit the pursuit of excessive product diversification and has a positive adjustment effect of regulation on the performance of product diversification, but it is not very significant.The main contribution of this paper is that it proposes the reasonable and complementary structure of the board has a positive effect in product diversification on the basis of regression analysis of external directors and internal directors. Besides, this paper presents and validates that there is a positive relationship between interlocking directors and the degree of product diversification and the ratio of interlocking directors has a significant negative effect of regulation on the performance of product diversification.