Regional Diversification,Financial Flexibility And Overinvestment

Regional diversification has always been an important part of enterprise strategy.Regional diversification refers to the expansion of enterprises' submarkets in different regions through horizontal or vertical integration.In recent years,China has actively promoted the construction of "one belt and one road" and "integration of Beijing,Tianjin and Hebei",providing unprecedented opportunities for regional diversification strategy.At the same time,for the purpose of "becoming bigger and stronger",enterprises themselves tend to expand across regions,especially large and medium-sized ones,trying to seek a broader market space and more market opportunities.Since the reform and opening up,China's private enterprises have developed rapidly.By the end of 2017,the number of private enterprises in China has exceeded 27 million,and the proportion of private economy in GDP has exceeded 60%.Similarly,private enterprises also play an important role in the wave of regional diversification.During China's economic transformation,correctly analyzing the impact of regional diversification strategy on the investment efficiency will help improve the overall performance of private enterprises.In addition,the implementation of regional diversification strategy may bring about such problems as expanding capital demand,increasing organizational and management costs,inefficient and even inefficient internal capital market and decentralization of the main business,which may have adverse effects on the financial flexibility of private enterprises.Therefore,there is a close relationship between the regional diversification strategy,financial flexibility and investment efficiency of private enterprises.At present,the existing research has not touched on the relationship between regional diversification and overinvestment,and the research on business diversification shows that business diversification can restrain the overinvestment behavior of enterprises.Therefore,it can be inferred that regional diversification,as a manifestation of diversification strategy,may have the same inhibitory effect on enterprises' excessive investment behavior.Therefore,this paper attempts to explore the relationship between regional diversification and corporate overinvestment behavior and its impact mechanism from the perspective of financial flexibility.Thus,this paper takes 2010-2017 China's private listed companies as a sample,while introducing the intermediary effect theory to verify the intermediary role of financial flexibility in the process of regional diversification affecting overinvestment.This paper includes six parts.The first part is the introduction,mainly including the research background,significance,research methods and ideas,as well as the innovation of this paper.The second one is literature review,including the definition of the research object,combing and summarizing the current domestic and foreign related research,as well as the intermediary effect of financial flexibility.The third one is theoretical overview and research hypotheses.The theory is analyzed to provide a solid theoretical basis.The fourth part is the research design and model construction.The model includes Richardson(2006)inefficient investment model and three stepbystep test models of intermediary effect.The fifth part is empirical test and result analysis.Through descriptive statistics,correlation analysis,multiple linear regression,Bootstrap method and other test methods,the relationship between regional diversification and overinvestment,the intermediary effect of financial elasticity between regional diversification and overinvestment are tested,and came to a conclusion.The sixth part is to summarize the main conclusions,analyze the reasons,put forward the corresponding countermeasures and enlightenment,while pointing out the inadequacies and prospects.The main contributions are as follows: Firstly,the existing literature seldom studies the relationship between regional diversification and financial elasticity.This paper uses related theories to analyze the relationship between regional diversification and financial elasticity,enriching the research dimension of financial elasticity.Secondly,the study shows that the regional diversification of private enterprises has a significant inhibitory effect on over-investment,which provides new evidence for the "diversification premium" of private enterprises.Thirdly,the existing literature on regional diversification and overinvestment has not yet touched on the mechanism of their relationship.This paper analyzes the role of regional diversification in overinvestment from the perspective of financial flexibility.Fourthly,this paper combines the development status of China's private enterprises,from the perspective of private enterprises to explore the impact of regional diversification strategy on financial flexibility and excessive investment behavior.The results of this study show that the regional diversification strategy of private enterprises will reduce the financial flexibility of enterprises,and the financial flexibility is positively related to overinvestment.Therefore,the regional diversification strategy of private enterprises can restrain excessive investment by reducing financial flexibility.