A Study On The Correlation Between Degree Of Diversification And Performance Of Financial Holding Companies In China

In recent years, financial holding company, as a new organizational model of diversifiedbusiness emerges at the right moment. According to China’s actual situation, financial holdingcompany can be regarded as an ideal choice for Chinese financial industry to achieve diversifiedbusiness. However, the domestic and international practices illustrate that development of themode does not mean that all of the diversification has brought better performance. There are stillcontroversial. Therefore, it becomes more theoretical and practical significance to studythe effects of diversified business on the performance.This paper intends to study the correlation between the degree of diversification andperformance of financial holding company using specifications analysis and empirical analysis.Specifically, in the theoretical part, firstly, this paper summarizes the connotation of financialholding company and its related diversified theories. Secondly, it analyses the development ofthe mode in our country, including the classification and the risks of financial holdingcompanies, its developing background and opportunities. In the empirical section, this paperselects the commercial banks under the background of financial holding company in china as themain study object, between2009and2013. The degree of diversification and operatingperformance uses Herfindahl index and factor analysis to measure. On this basis, the articlestudies the correlation between them using the linear regression method.Based on theoretical analysis and empirical research, the results show that under thebackground of financial holding company in our country, the degree of diversification ofstate-owned commercial banks is higher than that of stock commercial banks. The overall trendof the degree of diversification is rising. In the contrast, the overall operating performance offive state-owned commercial banks of financial holding company background has a certain gapcompared with the overall operating performance of the stock commercial banks of financialholding company background. From the correlation of them, a greater degree of diversificationof stock commercial bank of financial holding company background can help to improve itsoperating performance levels, but state-owned commercial banks under the background offinancial holding company have no significant linear relationship between diversification andoperating performance. Finally, based on the conclusions and experience from foreign countries and regions, the paper researches the problems and the developing direction that the financialholding company should pay attention to in the financial reforming and financial deepeningprocess and provide suggestions to achieve a sound financial holding pattern in our country.The innovations of this paper are that it studies the financial holding company,diversification and performance. The financial holding companies in our country are classifiedby the standard. There will study the correlation between operating performance and the degreeof diversification of financial holding company. So the previous situations are changed that onlystudy the aspect of the performance evaluation. Operating performance evaluation is not onlyimportant to pick one or two conventional indicators, but to find out more indicators to arrive ata comprehensive performance.