Diversification And Corporation Performance

During recent years, real estate is greatly hot, corporations in our country move towards the diversification management in abundance, but often with failure come to an end. Given that the corporations are interested in the diversification, this paper obtains from the diversification motive, the main principal-agent theory and the institutional school theory will be carried on the theory discussion. Afterward, we will come up with a hypothesis about the "premium" or "discount" problems which are always argued in lots of papers, based on the real condition of our country. In the selection for the measuring of diversification, we have measured the diversification degree as well as the diversification strategy precisely, besides, vertical integration and complementary diversification are measured in this paper. To weigh the corporation performances comprehensively, we select ROA and Tobin Q for corporation’s value and Beta coefficient for corporation’s system risk. For the main part of this paper, we will analysis the influence of diversification regarding on these three variables. This paper utilizes the fixed effect and the random effect models to do empirical analysis using the data of Chinese company be listed on A share market from 2000 to 2010.These companies must be exist for these elevens years continuously. Looking from the regression result, we in the certain extent confirm the diversification is fit for the "discount" theory, but is not same regarding short-term and long period value’s influence. Moreover the diversification could not melt the system risk which the corporation faced. Our conclusion gives the answers to the questions about why our corporation is interested in diversification as well as how to carry on the diversification management to a better lever. In the entire analysis, the stockholder’s rights concentration degree, the management holding, the corporation nature and the corporation size are affecting the diversification motive, which will affect the corporation performance along with it. These results also have certain significance to listed companies’ organizational structure and efficiency in our country.