An Empirical Analysis Of The Diversification And Corporate Performance Of Manufacturing Listed Companies During The Period Of1993-2012

Ansoff(1957) propsed that the diversification is business model that improve the company’s profitability.Company Performance is the company’s comprehensive competitiveness, profitability and development capacity. Since Lang and Stulz (1994) found that "diversification discount" phenomenon, the study of the relationship between diversity and corporate performance has become a hot spot. China’s listed company’s history is only twenty years compared with hundred years of history of modern western businesses. Therefore, this paper study the relationship of diversity and corporate performance of listed companies during the period of1993to2012.An Empirical Study of the existing literature on the relationship between diversity and corporate performance is essential to select a time span of3-5years, and the empirical research of20consecutive years about the relationship between diversity and corporate performance of China listed companies does not exist. Therefore, the study of the relationship between the diversity and performance of manufacturing listed companies in China has a significance. Furthermore,the paper make the financial crisis as the cut-off point to study the relationship between the diversity and performance. The empirical results show:First, the relationship between diversity and corporate performance of manufacturing listed companies in China during the period1993to2012was significantly negative, ie, the existence of diversification discount. Second, diversification discount is more serious after the financial crisis (2009-2012)Then choose the1140observations of57manufacturing listed companies in China during the period of1993to2012as samples.The paper choose ROA and ROE to measure corporate performance. Based on specialization ratio (S) Wrigley (1970) proposed, the paper choose specialization ratio (S) to measure diversity. And the paper choose a company of age (AGE) and the gearing ratio (DA) as control variables to construct measurement model on diversity and corporate performance. The paper carry out logarithmic processing for each variable in order to avoid that variable sequences are not smooth because panel data of this study was20years. In the existing literature on the empirical study of diversity and corporate performance, the study of the model of logarithmic processing yet, so the model in this paper broadens the existing empirical research. According to specialization ratio (S) Wrigley (1970) proposed,the paper classify the company. Compilation of statistics on the results of the change of the diversified company’s during the period of1993to2012is made diagram with stata11.0software. The statistics of the number of diversified companies of the research sample during the past20years has not been studied, the paper reflects the number of diversified company yearly by the chart is historical significantBased on the summary of the empirical researches diversity and corporate performance, the final empirical results which make the listed companies during the period of1993to2012as samples show that:First, the relationship of corporate performance and diversification of manufacturing listed companies in China during the period of1993to2012is significant negative, which suggests that exist diversification discount in manufacturing listed companies. The empirical result is consistent with the empirical research that based on data for the period1999-2003by Hong Daolin, Xiong Dehua (2006). Empirical studies about diversification and firm performance is essentially span3to5years.The paper select20years of historical data to enrich the existing literature and deepen the study of diversity and corporate performance from a historical perspective. Along with the establishment of Shanghai Stock Exchange and Shenzhen Stock Exchange, the first batch of listed companies in China was started development. So it is historic that the year of1993as the starting point for the study sample, which provide a reference about what kind of business structure should be choosed by listed companies perennialSecond, the relationship of diversity and corporate performance of China’s manufacturing listed companies was significantly negatively correlated both during the period of1993to2008and during the period of2008to2012. Also, diversification has a greater effect on corporate performance during the period of2008-2012. Diversification discount is more serious in the period of2008-2012. Making financial crisis as the cutoff point of empirical study to test the relationship between diversity and corporate performance is not yet. Therefore, this study enrich the existing literature, broadens the perspective of diversity and corporate performance and refine the study of diversity and corporate performance, which provide a reference whether China’s listed companies should choose diversity under different economic cycles...