Research On The Relationship Between Diversification Strategy And Firm Performance In Chinese Listed Media Companies

The relationship between the diversification strategy and firm performance has been a disputable topic. The foreign and domestic scholars have done quite a lot research of this topic, but no consistent conclusion has made. Due to the deregulation of the government, the media industry of China developed fast and there are some listed media companies in the past few years. These companies are trying the diversification strategy and the result is success or failure. In order to make clear the relationship between diversification strategy and firm performance, we choose ten listed media companies as samples, and employ regression method to do an empirical research.This article includes four parts:Part 1:Introduce the background of this article. Chinese media companies gained many achievements when they tried to transform from units to real competitor of the market in the past 20 years. The number of newspapers and TV stations grow to a high level, and some media conglomerates have been set up. From the year 1998, there has been an investing upsurge of media. We should know that, the competence of domestic media conglomerates is very weak compared to global media conglomerates. So they have to think over the development strategy, including the diversification strategy.Part 2 :Literature review of diversification strategy. In this part, we review the diversification theory, including the concept, the classification and the motivation of diversification strategy. Then we do a literature review of the research on the relationship between diversification strategy and firm performance and that of media industry. We review the foreign and domestic scholar's research separately. In its 50 years'history, the researches on this topic drew several different conclusions, and they are even conflict to each other.Part 3 : Empirical research on the relationship between the diversification strategy and firm performance of Chinese listed media companies. We choose the data of 2001-2004 from the annual report of ten listed media companies as the samples. On the basis of availability and measurable of the data, we set up a set of index and a single linear equation. We deal with the original data to fit the index and do a description analysis of the varieties. Then we make three kinds of regression of the independent varieties and the dependent varieties. The empirical research draw a few conclusions, and the most important one is diversification strategy has a lagged, positive effect to firm performance.Part 4 : The recommendations and the researches in the future. According to the conclusions of the empirical research, the status quo of Chinese media companies, and the development of international media industry, we recommend that: for the sake of long-term development, media companies should carry out diversification strategy; It's important for Media companies to choose appropriate target industry they intent to enter, and the way to realize the target is also important; The deregulation of media industry is a necessary condition for Chinese media companies carrying out diversification strategy. The research in the future may be is a larger sample regression, analyzing the relationship between the related-diversification/the unrelated-diversification and firm performance separately, and paying attention to international diversification of Chinese media companies.