Diversification Of Investment And Corporate Value

This study investigates how the ownership structure influences the extent of diversification of investment, and it also analysis the relationship of the diversification of investment and value of the China listed companies. Through hand-collecting the data of total China listed companies from 2004 to 2006, and using the multiply regression model, the empirical evidence reveals that the corporate who owns lager size of investment is easier to destroy the corporate value. The companies with low ownership concentration incline apply diversification strategy. If the director of the board is also the manager of the corporate, it may cause agency cost which influences the extent of diversification, and the diversification discount exists. The reason of the diversification discount is the inefficiency of China internal capital market.This study differs from the study on multi-segment diversification or business group level diversification. On the view of Agency Theory, the measure of the extent of the diversification of investment in this study conquers the troubles due to not so good disclosure of the companies' accounting information. The result suggests that the extent of the diversification of investment influences the value of the company negatively.