Research On Economic Effects Of Manufacturing Listed Company’s International Diversification

Today, the activities of many large enterprises are diversified. This is reflected not only in industrial diversification, but also in international diversification. For a long time, industrial diversification obtained a lot of research. In contrast, the international diversification received very little attention, and the related research on the economic consequences of international diversification mainly concentrated on developed countries, especially for America. For Chinese enterprises, the strategy of international diversification is becoming increasingly important. This is not only the inevitable choice to continue the expansion of Chinese enterprises, but also the strategic requirement of the CPC Central Committee and the State Council under the new situation of global economic integration. Based on the samples coming from Chinese manufacturing listed companies, this paper explored the impact of corporate international diversification on firm performance, and further explored the mechanism of international diversification strategy affecting corporate performance. In this paper, the mechanism of international diversification strategy affecting corporate performance is divided into process effect, organization effect, learning effect and incentive effect. This paper empirically tested the process effect of international diversification. This not only has academic value, but also has an important reference significance for corporate managers and relevant government departments to formulate policies.To carry out the research, this paper takes the general steps of scientific methodology coming from the economics and management science. In this paper, the general steps are:first, put forward the questions, and the nature of the problem was identified; secondly, a review of the relevant literature, and pointed out the innovation of this paper; third, propose the research hypothesis; fourth, empirical test, and the interpretation of the results; finally, we draw a conclusion. In the study, this paper compared the international diversification to industrial diversification, to explore whether both had different impact, and examine the cross effect of both. Through theoretical analysis and empirical test, we draw the following conclusions:(1) This paper firstly analyzed the effect of international diversification on corporate value. Theoretical analysis shows that, there are many differences between international diversification and industrial diversification, so they have different impacts on corporate value. This paper finds that there is statistically significant positive relationship between international diversification and corporate value, while industrial diversification is statistically negatively related to corporate value. Further analysis shows that industrial diversification will positively moderate the positive relationship between international diversification and corporate value.(2)According to the basic stock pricing’ formula, the factors affecting the stock price were decomposed into earnings per share, corporate growth rate and the discount rate. Then this paper discussed the effects of international diversification on the three factors. Earnings per share depend directly on the firm financial performance. This paper finds that the relationship between international diversification and firm financial performance is statistically significantly positive. But this result depends on the proposition that international diversification is exogenous variable, and endogeneity test show that the proposition can not be rejected. Analysis on the shape between firm financial performance and degree of international diversification indicates a significantly inverted U relation exists between firm financial performance and the degree of international diversification. This paper also finds that industrial diversification is not a moderator of the relationship between international diversification and firm financial performance.Theory suggests that international diversification helps to reduce the risk of enterprises; but the degree of international diversification is positively related to corporate risk in multinational corporations. The empirical research on risk reduction by international diversification shows that, international diversification strategy significantly reduces corporate systematic risk and operating risk. There is no statistically significant relationship between the degree of international diversification and corporate risk in multinational corporations; but further analysis shows that, the diversification of enterprise international diversified into developed countries can significantly reduce the systematic risk of enterprise. This shows that the effects of corporate international diversification strategy on risk can be affected by host political and economic environment.From the perspective of corporate growth, this paper researches the relationship between international diversification and growth, and takes comparative analysis to industrial diversification. Results show that, the relationship between international diversification and firm growth is statistically significant positive, while there is no statistically significant relationship between industrial diversification and growth. Further analysis indicates that, the statistically positive relationship between international diversification and firm growth only exists in the absence of the controlling shareholder of the company. It reflects the principal-agent problem between the shareholders and managers. In multinational Corporations interior, the relationship between international diversification and firm growth conforms to a horizontal S-shaped hypothesis.(3)According the existing research results, corporate innovation and capital structure will affect the corporate market performance and financial performance. This paper investigates the impacts of international diversification and industrial diversification on corporate innovation. It was found that international diversification significantly promoted the innovation activities of the enterprises, and industrial diversification significantly suppressed the innovation activities of the enterprises. At the same time, the impacts of international diversification and industrial diversification on firm innovation also have interactive effects. International diversification helps to moderate the negative relationship between industrial diversification and corporate innovation, and the rise of the degree of industrial diversification will ultimately negatively regulates the positive relationship between international diversification and corporate innovation. Robust test shows that, the conclusions are not affected by the effect of sample selection.Theory suggests that because the economic behavior between countries is not completely related to each other, international diversification is helpful to raise the enterprise’s debt ratio. But the empirical research finds that international diversification significantly reduced the enterprise financial leverage, contrast to industry diversification; and the reason mainly lies in that transnational management increases agency cost of debt, so international diversification reduced the company’s debt ratio. At the same time, the relationship between the level of international diversification and corporate debt ratio is significantly positive for multinational corporations.