The Comparable Research On The Diversification And Business Performance Of The Private-owned Enterprises Listed In Shanghai Stock Market

The business strategy of diversification has gained hot discusses among many economists and strategic management researchers since it was brought forward in the 1950s.There is no confirmative conclusion of the relationship between the diversification and corporate performance,both in academic research and commercial practice.In the socialist market economy of China,private-owned enterprises,as a form of business organization in accordance with market principles,carried out a lot of diversified business practice,with both the experiences of success and failure in the 1980s and 1990s.At present,most domestic researches,regarding diversification and business performance,contained comprehensive analysis of different types of samples from all listed companies.However,they seldom concerned the private-owned enterprises with enlighted inspiration.Therefore,this essay will mainly focus on the listed private-owned enterprises,especially to those in Shanghai Stock Market.To some extent,it will contribute to the theoretical and practical significance of their performances.On the one hand,we will verify the applicability of the diversification discount or premium to the private-owned enterprises in China.On the other hand, business proposals will be put forward according to the feasibility of the diversification of private enterprises.This essay has adopted both methods of quantitative analysis and comparative analysis,re-established the specialized Rumelt rate(SR) criteria by observing the diversification degree of private-owned enterprises based on the research samples, which include 107 listed private-owned companies from 2005 to 2007.We will use Specialization Rate(SR) and Herfindahl index(HDI) to measure the diversification of the corporate.Besides,we will use Return of Equity(ROE),Earnings of Per Share (EPS) and Return on Assets(ROA) to measure business performance.Then we will compare the impact of different diversification degrees,different diversification types to their business performances,in order to get the correlation through descriptive statistical analysis and regression analysis. We can conclude that there is obvious negative correlation between the degree of diversification and corporate economic performance.The higher the degree of diversification is,the worse the performance of the business will be.This significant relationship is also reflected in the dominant business or concentrative business,the latter including single business and dominant business.To these businesses,the lower diverfisication degree they implement,the better performance they will achieve.However,the regression does not support the correlation between different diversification types and corresponding business performances.Finally,according to the empirical results,we will put forward some suggestions to the development of private-owned enterprises in China,from the aspectives of managers,the iniative diversification behavior and the principles of diversification.