Research On Factors Affecting Unrelated Diversification Of Listed Company

Despite many results of empirical study have proved that diversification will have a negative impact on the company's performance, and academe have been detesting unrelated diversification,but in which like GM, Chunlan Group, domestic and foreign companies have achieved great success. In 2006, unrelated diversification of listed companies in China was very common, and listed companies with unrelated diversification accounted for about third of the total number of sample companies. Which factors affect whether a listed company will select unrelated diversification? Which factors affect the level of unrelated diversification of a diversified company?The dissertation expatiate the theory on factors affecting unrelated diversification decision, and analyze factors affecting unrelated diversification on the base of resource-based theory, describe unrelated diversification of listed companies in 2006.The statistical result shows listed companies with unrelated diversification on two or there degrees account for 80.39% of the amount of sample companies, but their earning capacity are inferior to both specialized companies and companies with related diversification. Listed companies with unrelated diversification above four degrees account for 19.61% of the amount of sample companies with unrelated diversification, which are less than that years ago not only in the quantity, but on the degree of diversification, and of which earn rate of net asset are better than both specialized companies and companies with related diversification owe to cutoff department to the bad. Empirical studies use Logit model to verify how free cash flow, proportion of state-owned shares, main industry development and operating risk affect choice of unrelated diversification strategy. Regression results show that large proportion of state-owned shares of listed companies do not tend to unrelated diversification. Listed companies in possession of the excessive accumulation of free cash flow with not well-feasibility study, under the unstable circumstances of the main industry, involved in the high-tech industry under the higher risk. The subsequent use of multiple linear regression model of verify how free cash flow, debt capacity, internal capital market, R&D investment, company scale, proportion of fixed assets and main industry development affect level of unrelated diversification of listed company. Regression results show that free cash flow and debt capacity have positive correlation to level of unrelated diversification, expose that existing and future availability of financial resources play important role in promoting diversification. Investment or upgrading of fixed assets and R&D activities are in need of consumption of resources. Company size and main industry development contact supply of resources closely. The internal capital market theory known in the West does not apply in China, and has no significant impact on unrelated diversification of listed companies. According to the final conclusion of the study, put forward proposals on how to prevent listed companies blindly to choose unrelated diversification and how allocate free cash flow in the rational way...