The Listed Company’s Diversification Strategy And Internal Capital Market Efficiency

The internal capital market exists wildly in diversification coporation.Someresearchers consider the internal capital market may improve the value of diversificationcoporation because of it’s merit，such as the reduce of transaction cost in financing;butother researchers consider the internal capital market may impair the value ofdiversification corporation because of it’s shortcoming，such as the crossed subsidybetween departments. So how about the relationship between diversification strategy andthe efficiency of internal capital market? As the date of internal capital market is difficultto collect,the empirical research in this area is few in our country. So in order tocomplement it by the date from the listed corporate in our country,this paper research theeffect of diversification strategy on internal capital market efficiency. We analysediversification strategy from two persperctives:the degree of diversification and the type ofdiversification.This paper initially makes the definition and type of diversification,and sums up themotive and influential factors of diversification,and makes a review of relevant papers anddocuments to conduct a theoretical analysis of the relationship between diversificationstrategy and internal capital market efficiency. Then on the basis of theoretical analysis,thispaper make empirical study of the correlation between diversification strategy and internalcapital market efficiency.With the result showing that:(1)There is significant negativecorrelation between diversification degree and internal capital market efficiency.(2)Thereis significant correlation between diversification type and internal capital market efficiency.(3)The unrelated diversification impair the efficiency of internal capital market in depth.Based on the analyse of the conclusion,we proposed the related suggestions asfollowing:choose the diversification strategy prudential based on the resourse of corporate.