Study Of Relationship Between Construction Enterprises’ Diversification And Financial Performance

Diversification has always been an effective way for enterprises to avoid risk aswell as an inevitable choice when they have developed to a certain scale. But as to theissue whether an enterprise is suitable to implement diversification and how toimplement a diversification strategy, neither domestic nor foreign scholars have yetreached any agreement. Considering the current market downturn in the constructionindustry and the increasingly fierce competition, many construction enterprises havebegun to try diversification operations in order to avoid risks and find new profit growthpoint.Based on the construction industry in China who has now entered the trend ofindustrial structure adjustment, this thesis attempts to analyze the following issues: theoverall diversification strategy implemented by China’s construction enterprises, theultimate impact of diversification of China’s construction enterprises on the level offinancial performance, whether it is appropriate to diversify China’s constructionenterprises operating and how to implement diversification. The thesis begins with achief introduction to the relative theories concerning diversification. Based on this, thethesis makes a qualitative analysis of the positive and negative effects of diversification.Starting from the perspective of these related theories, the thesis discusses and exploresthe motivation and the problems in the course of diversification implemented byChina’s construction enterprises. The final section of the thesis is an empirical analysisof the impact of diversification on the level of corporate financial performance.In the process of empirical analysis, the thesis selects30listed constructionenterprises in Shanghai and Shenzhen as research samples and the annual financial data report of listed companies released by SFC during2008-2011as indicators of the study.The type of diversification and the degree of its effect on the level of financialperformance of these sample listed enterprises are analyzed quantitatively.Based on these analyses, the thesis moves forward the analysis of empirical results.In view of the status quo of diversification practice employed by China’s constructionenterprises, the thesis points out that China’s construction enterprises are supposed toadopt the strategy of progressive implementation related to their major businesses at thebasis of enhancement of the core competitiveness of enterprises. Ultimately, the thesisputs forwards several specific proposals such as the practice of prudent diversificationcombined with the characteristics as well as status of construction enterprises.