Diversification Strategy And Corporate Value Relationship: Theoretical, Empirical, And Its Strategic Adjustment Research

Diversified strategies have always received many focuses from theorists and practitioners since their founding. Many scholars actively explore the topic from several perspectives, and one of the important topics is the relationship between diversified strategies and firm value. After the 1980's, the value of diversified companies, especially the value of companies in the developed countries has been gradually destroyed, the status of diversifity in the companies greatly declines. Many scholars generally ascribe the bad phenomenon to diversified strategies themselves. By obseving the reality, however, we found there are companies both of high value and of low value whether in the developed countries or in the developing countries. Perhaps, we can't deny that diversifity is an effective growth strategy, but the eventual outcome forces us to oppugn the diversified strategies, which cause us to think the reality. By reviewing the existing literatures, the author finds that there are still many limitations and even vacuities, including theory framework, research methods and measurement of related variables. So it is still very high theoretic value and practical implications. The objects of the book mainly include three aspects: (1) by analysing the effect of diversified strategues on firm value, constructing the theoretical model about the relationship among the degree, types and modes of deversified strategies and the firm value; (2)by exerting the statistic method, testing the theoretical model so as to provide the support on strategic decisions and management tools for the managers of Chinese companies; (3)by builing a dynamically theoretical model about the fit between core competence and actions, analyzing the strategic adjustment of the diversified strategies based on firm value maximization.After realizing the importance and goals of the research, the book defines the main variables, reviews the related literatures and constructs the theoretical model for the relation between diversified strategies and the firm value. There are three kind of variables in the model: (1) the independent variables, namely diversified strategies, including the degree of diversified strategy, the types of diversified strategy partitioned into the related diversified strategy and the unrelated diversified strategy, and the modes of diversified strategy partitioned into the external development, the internal acqusition and the mixed; (2) the dependent variables, namely the firm value measured by four indexs of the return on total asset, eaning per share, net asset per share and operating cash flow per share; (3) the control variables, including four indexs of the firm size, financial leverage, the concentration degree of stock and the corporate culture.Then, the book discusses the analytic method and the sources of sample data. One the one hand, because of selecting sample firms of the single industry, that is, manufacturing industry in China, the book overcomes the limitations in the past related researches for ignoring the industrial structure. The period of the sample firms is from the 2001 year to the 2004 year. On the other hand, the book breaks through the status of cross-sectional data in the past related researches, and constructs a new data structure, namely panel data. Thereinto, the period of the independent variables and the control variables is from the 2001 year to the 2003 year, and the perion of the dependent variables is from the 2002 year to the 2004 year. That is , the period of the dependent variables lags one year behind the independent variables. By constructing the panel data, the book overcomes the limitation of ignoring the causal relation between diversified strategies and the firm value.Again, the book empirically analyses the relation between the diversified strategies and the firm value. Because the diversified strategies have been partitioned three dimensions, namely the degree, types and modes of the diversified strategies, the book regresses the four indexs of firm value by the independent variables of the degree, types and modes of diversified strategies respectively. At the same time, the multi-analysis run by two steps in order to separate the effect of diversified strategies on the firm value. Thereinto, in the first step, the indexs of firm value regress on the four control variables, and then, the variables of diversified strategies are imput into the regress model based on the first step. By the empirical analysis, the book draws such conclusions:â… .on the relation between the degree of diversified strategies and firm value. the degree of diversified strategies showes significantly positive relation with all indexs of firm value. That is, with the rise of the degree of diversified strategies, the firm value gradually increases.â…¡.on the relation between the types of the diversified strategies and firm value. The related diversified strategy shows negative relation with all indexs of firm value, and the unrelated diversified strategy shows positive relation with all indexs of firm value.â…¢.on the relation between the modes of diversified strategies and firm value. Generally, firms are more be inclined to select the mixed mode, next the mode of external acquisition, and last the mode of internal mode. The mixed mode shows significantly negative relation with firm value; the modes of external acquisition and the internal development do not pass all of the significant tests.â…£.in sum, the empirically analytical results basically validate the all of the theoretical hypothesis between diversified strategies and firm value, so the empirical effet is relatively ideal and basically come true the expectation.Finally, the book further explores the adjustment of diversified strategies. Diversified strategies will give firm objective a positive or negative effect. When diversified strategies harm the objective of firm value maximization, it is very necessary to appropriately adjust them. The book first put forward that the objective of strategic adjustment is firm value maximization. Then by using the thought of"On Contradiction", the book analyzes the mechanism of strategic adjustment, namely the core competence, and constructs the path of strategic adjustment, namely the dynamically matching model between core competence and corporate activities.