Empirical Study On The Relationship Between Diversification And Corporate Liabilities For Listed Companies

Since the nineteen sixties, enterprise’s Corporate Diversification has always been the focus of foreign theory and business community. With the rapid development of economic and market, more and more companies are seeking for Corporate Diversification model to reduce their operating risk so as to enable themselves to progress in a healthy manner. Corporate Diversification has already occupied the leading position among our countries’business so far. There is no doubt that Corporate Diversification has made a lot of successful companies, but it can also cause the decline of many companies. In fact, the failure of Corporate Diversification originates from that the operating risks of Corporate Diversification can’t be predicted scientifically and the companies’ operation and financial risks can’t be combined rationally. The practice of Corporate Diversification indicates that it is not in accord with the expectation of reducing companies’operating risk. When companies’operating risk enlarges, companies can not weigh the relations between operating risk and financial risk, which leads to companies’improper Liabilities structure and irrational integration between the speed and style of financing and the Corporate Diversification style. So as to ensure the enterprise’s Corporate Diversification to go with a swing, we must anticipate the capital demand and time of Corporate Diversification rationally in order to arranges the distribution of companies’ financial resource reasonably and raise the efficiency of capital liquidity and finally promote Corporate Diversification and corporate Liabilities to support each other. Therefore, it has a practical significance to study the enterprise’s Corporate Diversification from a financing point of view. From a practical point of view, it is a trend to be Corporate Diversification. But it is not necessary. Only when we fully understand the relations between Corporate Diversification and corporate Liabilities and promote them to develop harmoniously can we pave the way for companies’ development.This paper theoretically analysis the relations between enterprise’s Corporate Diversification and corporate Liabilities and makes conclusions as follows:firstly, with the deepening of enterprise’s Corporate Diversification, the increasing coordinated activities and the possible delayed decisions may cause the operating risks to rise. Based on the principle of reasonable arrangement between operating risk and financial risk, companies are inclined to adopt the conservative financial strategy when the measure of enterprise’s Corporate Diversification is high. Secondly, when companies adopt Corporate Diversification, the deepening irrelevance of business will increase companies’operating risk. Under this circumstance, companies will depend more on inner capital market and give up external financing so as to reduce their cost and avoid the transaction costs and potential risks when they introduce new stockholders and creditors. Thirdly, the main factors that will influence the structure of corporate Liabilities are sales situation, capital structure, industry span and enterprise scale. According to the theoretical expectation of Liabilities structure, the single services companies whose asymmetric information is less will adopt short term Liabilities because of the high information cost in the long term Liabilities. On the other hand, irrelevance services companies whose asymmetric information is more will be inclined to the long term Liabilities. Therefore, enterprise’s Corporate Diversification will reduce the standard of companies’Liabilities.This paper verifies the inclusion of theoretical analysis by adopting the data from listed companies in china’s securities market. The empirical results reach conclusions as follows:firstly, with the deepening of companies’Corporate Diversification, the companies’total asset-liability ratio and short term asset-liability ratio will reduce. That is to say, the correlation between the degree of companies’Corporate Diversification and the level of corporate Liabilities and current liabilities is negative. Secondly, when enterprise’s Corporate Diversification style turns from single to irrelevance, the standard of companies’Liabilities will reduce steadily. The negative correlation between companies’Corporate Diversification and the level of corporate Liabilities indicates that the expansion of enterprise’s Corporate Diversification can’t enhance the ability of their Liabilities financing. Thirdly, with the increasing of the irrelevant degree of corporate business, corporate current liabilities will reduce. The correlation between the style of companies’Corporate Diversification and the level of corporate current liabilities is negative. That is to say, the current liabilities level of single business corporate is the highest, while the leading business and relevant business corporate are in the middle and the current liabilities level of irrelevant business corporate is the lowest. Therefore, the empirical analysis verifies the conclusion of theoretical analysis. Companies’ Corporate Diversification will influence the standard of corporate Liabilities.This paper has five parts. The first part is introduction, which introduces the research purpose, writing significance, study approach and the whole framework of this paper. The second part is literature review. The third part is about the theoretical analysis and research hypothesis of the relations between companies’Corporate Diversification and the level of corporate Liabilities, which advances this paper’s hypothesis based on the concept of enterprise’s Corporate Diversification and so on. The fourth part focuses on the demonstration analysis about the relations between the companies’Corporate Diversification and the level of corporate Liabilities. By building this paper’s research hypothesis and making up multiple linear regression model, this paper test the influence of the listed enterprise’s Corporate Diversification on the corporate Liabilities empirically. In order to ensure the steady and noosphere of this paper’s empirical result, this paper introduces the autoregression model to test the robustness of the demonstration. The fifth part are the research conclusion and policy suggestion, which combines the empirical results and makes the relative policy suggestion. Then at last this paper points out the deficiency of this paper.