The Research On Diversification Performance And Risk Of American Financial Group

Since the late middle of 80's of 20 centuries, with the increasing trend of financial freedom and financial integration, there is a wave of financial diversification emerging worldwide. Facing dramatic change of financial environment outside, as well as various limitations on the divided operation of domestic financial sector, it appears more urgent for the reform of domestic, financial system. Financial diversification has become the trend of the times as financial service is going through deep structure reform. Mixed operation is still forbidden by legislation in China at present. As a result holding companies show their advantages as financial diversification group model over other existing models of mixed operation and divided operation. Nowadays a large number of financial diversification groups similar to financial holding companies come out in our country, such as Guanda Group, Zhongxin Group and Pinan Group. But there is no legislation on financial holding companies; what is more, domestic financial holding companies have a lot of issues to be resolved with limitated number, premature models, imperfect governing and the shortage of relevant oversight mechanism. In contrast American finance is leading in the world, where mixed operation and diversification operation have a quite long history. The diversification operation of American Financial Group is representative, and the experience and lessons drawn from sub-mortgage crisis in the process of financial diversification development is much more valuable. So based on American Financial Group, the paper makes theoretical and empirical study with the help of financial data collected from sample companies.The paper contains five chapters in total.The first chapter is general introduction of the paper, which includes the research background, significance of the theme, research methods, innovative points, main contents as well as the outline. This part specifies the purpose of the paper. The second chapter is about the establishment and current development of American diversification financial group. It deals with the establishment background, two models, particularly the main model-the establishment and development of financial holding companies, the oversight models and the current financial holding companies under the situation of financial crisis.The third chapter is the brief introduction of relevant theory of financial group diversification operation. It defines relevant specialized words such as diversification and financial group. The following is several models of existing financial group in the world. Then it studies the theory of risk and financial group diversification operation and performance, which present the positive and negative effects that diversification operation brings on performance and risk. It also illustrates the possible risk caused by diversification operation as well as its origin.The fourth chapter deals with the study of risk and diversification operation and performance of American financial group. It employs empirical study, which analysis the impact that the extent of diversification and asset scale would have on company overall performance and the effects of spreading risk in diversification.The fifth chapter is the implication of the research conclusion to Chinese financial holding companies.