The Study Of Management Entrenchment Effect On The Corporate Diversification

Since the90s, our country enterprise gradually raised a hot wave of investment diversification,many enterprises through internal development and external acquisition methods such as graduallydeveloped for across different industries, has multiple points, subsidiaries of large enterprise groups.Diversification refers to the main business involves two companies and two or more the behavior ofthe industry. Company why diversification is a major concern of many researchers. Many researchscholars at home and abroad to company diversification motivation from different angles isanalyzed. Focus on managers’ personal interests in recent years, research on the effects ofdiversification on the company is a new hot issue, is the new trend of research in this field. Defense,manager management refers to the managers under the internal and external control mechanism ofthe company to maintain its position and pursue their own effectiveness maximization behavior.Managers are defensive behavior, on the company’s investment behavior, in turn, has had aprofound effect on the company value, to explain the phenomenon of "diversification discountoffers a new perspective.Based on the background of corporate governance under the transition economy in China, givefull consideration to the company managers’ personal motives, from the perspective of managersdefense the company diversification phenomenon to carry on the theoretical analysis and empiricalresearch. Theoretical analysis shows that corporate managers pursuing stable position, the moredefensive motivation that managers of private interests, is more likely to be diversified investmentcompany. The empirical results show that the higher the manager on behalf of the private interestsof executive pay, manager of defensive motivation, the more intense, the company, the higher thelevel of diversification. Finally, on the basis of above analysis, in order to reduce managers defenseagency cost, optimizing the company investment behavior is a principle is proposed for managers ofincentive, perfect manager market, legal system and relevant countermeasures and suggestions.