Research On The Relationship Between Diversification And Corporate Performance

The relationship between diversification and corporate performance has become the focus of controversy, but up to now, samples of China enterprises are rare, and it is unable to form a unanimous conclusion. Based on the Chinese listed companies in Shenzhen and Shanghai market, this paper researches the relationship between diversification and corporate performance. And unlike the previous study, this paper has not only re-established the index system measuring performance and degree of diversification, but has also considered the endogenous problem, which has been ignored but significant to findings, and integrates the interaction between diversification and the corporate performance, tests the stability of the model, thus gains a new conclusions about the relationship between diversification and corporate performance. Empirical research findings show that, in 2005 the diversification of China's listed companies has no impact on the ROE, and there is negative correlation between the diversification and net operating flow per share, the positive correlation between the diversification and Tobin Q. Based on Empirical studies, this paper gives Chinese enterprises the diversification strategy recommendations.