Study On The Relativity Between The Diversification Strategy Of Chinese Family Firms And Corporate Performance

Since Wernerfelt and Montgomery(1988),Lang and Stulz(1994),Berger and Ofek(1995)found the phenomenon of diversification discount,a large number of scholars of corporate finance discuss the subject.The point that diversification harms firm value has gradually become the consensus of financial theory.Financial scholars will also focus on this area,that is concerned about the diversification strategy and the relevance of corporate performance.Because our country belongs to the emerging market economy country,the soundness of the corporate governance structure and the perfection of laws and regulations are less than those of other western developed countries,so it is different from the western countries in the relationship between diversification and enterprise performance.Before and after 2005,China is in the process of economic transformation,in this stage the economic and political environment are more unique,the family formed in this period,it is a kind of historical phenomenon which is produced under the unique economic and political policy environment.So it has unique characteristics in vision,strategic goal,control structure,internal operation mode and resource disposition,and it is different from the general enterprise group in China.This form of family business in the Chinese market is more common,and it also plays a considerable role in promoting the economic and social to develop.Over the past two decades,the family enterprises rapid developing rapidly,while driving the capital market and national economic developing,but also hidden a lot of risks and problems.So there is still a need for a multifaceted theory to support research on serfs.As a diversified business has the relationship with the survival and development of enterprises,as a major business decision-making,the diversification strategy is not only directly related to a series of stakeholders of the vital interests,including managers,creditors,investors,but also can extent that the enterprise value and development prospects.Whether he is a theoretical scholar or a practical entrepreneur,they all make it as a research content.It is one of the most important issues in diversified research theory because that the affect between diversification and business performance can judge the rationality of diversity and can help us to understand diversity.In order to investigate the relationship between diversification and corporate performance of Chinese “Family firms”,combined with their institutional background of Chinese family firms,this paper uses normative research and empirical research,file retrieval,comparative research and other research methods,analyzes the data on the industry revenue composition and relative finance and accounting of 673 listed companies from 2011 to 2015,and study the relationship between diversification and corporate performance of China’s family companies deeply and systematically.In this paper,we use 673 families in 2011 to 2015 as the research object,in the study of the relationship between diversification and business performance,we use the different types of diversification,and classify entropy index into related and unrelated entropy index,and focus on the impact of related and unrelated entropy index on corporate performance.The regression results show that,in general,the relationship between diversification and firm performance is negative: unrelated diversification has negative relation with performance;related diversification has positively or related with corporate performance.The choice of different diversification strategies is very important to the enterprise,which can be seen from this article.Our findings highlight the importance of distinguishing different diversification strategies.For Chinese family companies,we suggest that the implementation of the diversification strategy should be cautious.