Research On The Relationship Between Diversification And Enterprises' Value Of Real Estate Listed Companies In China

Diversification is not only an effective way to divide the risk, avoid excessive competitions and increase the enterprises' value, but also a certain choice with the enterprises'development. When begins to operate it and how to perform it are always the focus of the theory and the business research. From the domestic and oversea theoretical literature, we can find that there are three relationships between the diversification and the enterprises'value:discount, premium and no relationship. Until now, the relationship between them has not got conclusive theory.In the influence of the macro-economic policy from 2003 and the global subprime mortgage crisis, the domestic real estate market is on the downturn and the competition becomes more and more fiercely. The real estate business's operating environment and functions have changed a lot. In order to avoid the risks, expand the sources of earnings and enhance the enterprises'value, a lot estate enterprises have also begun to attempt to relative diversification, even the un-relative diversification. Could the China real estate business's diversification increase the enterprise's value? Whether China's real estate business is suitable for diversification or not. Problems like that have aroused our concern.Based on the western and domestic research and the practice of the real estate in China, This paper pays more attention to the relationship between the diversification and the enterprises' value in real estate industry. Firstly, this paper reviews the basic theory of diversification enforcement and the impact of the diversification, including the positive and the negative effect of it. The main theories of the diversification enforcement are discharging risk, transferring resources, market power and principle- agent. Secondly, simply introduce the index of enterprise's diversification and value for the following empirical study.Thirdly, systematically analysis the current situation of the real estate industry. There are four aspects----China's real estate business characteristics, the reason for diversification in China's real estate business, the current financing statement and the future development trend of real estate enterprises. Fourthly, take some empirical study on the relationship between the diversification and the enterprises' value in real estate industry, make some assumptions, build mathematical models, and select the listed cooperates in real estate industry as the object of the study. By analyzing the financial information from 2007 to 2009 of the listed real estate cooperates, the result proves that:the enterprise's value will be discounted by diversification, while the relationship between them is not linear. There are two aspects to study the relationship of them. One is from the entire samples to study, another is classification samples which are eliminated the influence on the degree of diversification, the size of assets and the extend of liability. While they have reached the similar agreement:there are non-linear negative between diversification and the enterprises' value. In the end, summing up the results of the empirical analysis and give some advice to the current real estate enterprises. Furthermore, this paper points out the limitation of it and the direction of further study.