The Impact Of Vertical Integration On Business Performance

Vertical integration strategy is an important decision in enterprise management,involving all aspects of production and management within the enterprise.Under the background of the current increasingly fierce business competition,more and more listed companies choose to develop through vertical integration to enhance their own comprehensive strength.In our country,with the background of the reform of the supply side,the development of enterprises arises more and more attention.This paper choose China’s Shanghai and Shenzhen listed companies as samples,selecting agriculture,forestry,animal husbandry and fishery,paper printing,steel,electronic,chemical industries,using VAS to measure the degree of vertical integration,and select the two measures of business performance of companies.The use of value-added index method(VAS)to measure the degree of vertical integration of business performance,the indicators of profitability(expressed in return on assets)and growth capacity indicators(expressed in terms of the growth rate of the main business income)were used to carry out the panel data model regression using Eviews8.0.The vertical integration behavior of enterprises in different industries has different effects on business performance.Vertical integration strategy has a significant impact on the profitability of enterprises,and both are positive effects,of which the impact of non-ferrous metal industry is the largest;and the growth of enterprises only paper printing,electronic,non-ferrous metals,Building materials,furniture,automotive,energy industries is relatively obvious,and the relationship between automotive and energy industry show there are negative.This also confirms the measure of the Marliss growth model as a measure of profitability and growth at the time of expansion.The heterogeneity of the industry has a great influence on the choice of vertical integration strategy because of the large difference of the regression results among different industries.In addition,the panel data model regression in this paper also shows another proof that the model reflects the business performance and the degree of vertical integration between the degree of the existing research has not been as significant as the performance of the papers before.Finally,based on the empirical results in this article,I puts forward three suggestions for Chinese listed companies: firstly,based on the perspective of industry heterogeneity,to measure enterprise industry status quo of industry;secondly,based on the perspective of enterprise itself,considering from the perspective of enterprise capital chain and managers;thirdly,based on the perspective of national policy and industrial policy,to grasp the direction of the enterprise development.