The Study Of The Effect Of Corporate Governance On The Decision-Making And Implemental Efficiency Of Corporate Refocusing Strategy

Since diversification discount was found in the 1970s, the phenomenon of "returning to core businesses" began to arise in some western companies. Reaction to this phenomenon, some scholars proposed the concept of refocus and studied the driving forces and effects of refocusing strategy. Relative studies show that decision-making of refocus strategy is a corrective means taken by diversified companies due to poor performance, so refocus is also a mean by which to prevent companies from failing in diversification strategy. However, the fact that many companies such as Giant Group, Delong Group, and Sanjiu Group failed in diversified strategy inspired a question worthy of study:what factors hindered companies in making timely refocus strategy to prevent their failure in diversification strategy? Besides, the implementation of refocus strategy can reduce the diversification degree to resolve the problem of "diversification discount" which helps to improve corporate performance, but empirical results on the correlation between refocus strategy and corporate performance have not yet formed a consistent conclusion. Some literatures even demonstrate that no significant correlation exists between the two. Hence, this thesis proposes a second question worthy of probing:what factors influenced the efficiency of implementation of refocusing strategy which in turn influenced the economic effectiveness after the implementation of refocusing strategy? In reality, the coordinative evolution between corporate governance and strategy provides a realistic foundation on which to answer the above two core questions.In recent years, the important role of corporate governance on corporate strategic decisions has gradually attracted concerns from academics. Basic functions of corporate governance have transformed from traditional monitor and control to scientific decision-making. Consequently, corporate governance becomes one of the critical variables in guiding the refocusing strategy decisions. Besides, it has been found that there is no best corporate strategy. Only if corporate governance fits corporate strategy, can corporate strategy bring maximal value to the company. Hence, whether the implementation of refocusing strategy can improve the company's performance depends on the design of corporate governance. Therefore, this thesis studied the above questions based on relative literatures with methods of theoretical reduction and empirical study. On one hand, this thesis analyzed and tested the functioning path of corporate governance to refocus strategy decisions from the perspectives of strategic correction and proactive strategic change. On the other hand, it analyzed and tested the influence direction of corporate governance on the implementation efficiency of refocus strategy from the perspective of the strategic guarantee role of corporate governance.First of all, this thesis analyzed the two paths by which corporate governance affect refocusing strategy decisions. First, it analyzed the adjustment role of corporate governance on the relations between corporate performance and refocusing strategy decisions based on the principal-agent theory and the behavior theory by restraining opportunistic behaviors and correcting cognitive deviation. Second, it analyzed the direct role of corporate governance on the making of refocus strategy decisions based on the strategic change theory from the perspectives of resource supply, entrepreneurship nursing, and learning ability. An integration of the two paths forms the theoretical model about the role of corporate governance on the making of refocus strategy decisions.Second, this thesis illustrated the idea of studying corporate governance from the contingency perspective, analyzed the intrinsic logic and realistic existence of corporate strategy as a contingent factor of corporate governance. Then, it reduced change of corporate governance mechanism and environment which is endogenous in the implementation refocus strategy, analyzed corporate governance functions matching the implementation of refocus strategy based on the supplement and compliment effects of corporate governance mechanisms, and finally constructed a theoretical model about the influence of corporate governance on the implementation efficiency of refocus strategy.Thirdly, this thesis proposed research hypotheses based on nine indexes from two dimensions-board characteristics and equity characteristics and tested the path by which corporate governance influences the decision making and implemental efficiency of refocusing strategy with empirical methods. It generally concludes that corporate governance is not only an effective guiding mechanism of refocusing strategy decisions but also an important guarantee mechanism for implementing refocusing strategy. Specifically, conclusions are as follows:increase in percentages of independent directors and paid directors and reduction in the number of board meetings and in percentage of shares of the first biggest shareholder can significantly improve the negative sensibility of refocus strategy decisions to corporate performance; retrenchment of board scale, reduction in percentages of independent directors and paid directors, increase in the number of annual board meetings, implementation of the shareholding incentive scheme for CEO, intensification of equity supervision degree, and nature of equity held by natural persons have a facilitating role on forward-looking strategic change through refocusing strategy decisions; decline of the percentages of independent directors and paid directors and in equity supervision degree of the first biggest shareholder, increase in the number of annual board meetings and percentages of shares held by the first biggest shareholders and nature of the equity controlled by no-natural persons have a significantly positive role on the implementation efficiency of refocusing strategy, and board scale and percentage of shares held by CEO has a significantly reverse U-shaped role on the implementation efficiency of refocus strategy.Finally, this thesis analyzed limitations of the traditionally value-oriented optimization logics of corporate governance, constructed a strategy-oriented basic optimization logic of corporate governance, and summarized the refocus-strategy-based paths by which to optimize board and equity characteristics on the basis of the existing conclusions, thus having important realistic implications for guiding Chinese listed companies to perfect their corporate governance structures and thus to guarantee the efficient implementation of refocus strategy.The innovations of this thesis are embodied in three aspects. Firstly, this thesis breaks through the static method that ensures the diversified strategy effective and proposes the designing problem of corporate governance mechanism after the implement of diversified strategy based on the influence of corporate governance on the refocusing strategy in dynamic perspective, suggesting that the refocusing strategy is both the strategic corrective mean and direction of strategic change for the corporations which are implemting the diversified strategy. Second, this thesis breaks through the traditional research paradigm in the field of refocusing strategy that is the linear relationship of "performance-refocus-performance" and probes into the adjustment effect of corporate governance on the relationship between the performance and refocusing strategy, which extend the traditional model of cause and effect of refocusing strategy. Lastly, this thesis breaks through the function of corporate governance that only resolves the agency problem and anaylsis the function of correcting the strategic error and promoting the forward-looking strategic change, which forms the idea of dynamic optimization design of corporate governance based on corporate strategy.