The Relationship Between Corporate Diversification Strategy Choice And Board Governance

Since 1990s, with the deepening of economic reform and an increasingly competitive market in China, many domestic listed companies have adopted acquisitions, mergers and reorganization for aims of diversification strategy to avoid operational risks, raise capital and strengthen competitiveness. At that time, diversified management became the first choice to develop company.Corporate governance certainly can impact the decision when a company chooses its strategy. Board governance, the key factor in corporate governance, will affect the company's diversification level and behavior if the board. How the characteristics and behavior of the company will affect its diversification strategy choice? How they affect each other? In the previous literature, although many documents related to this point, few made specially and in-depth studies. This paper adopted empirical analysis and attempt to study their relationship and to provide a theoretical basis for the researches of corporate governance.In this paper, we use the sample of the domestic listed companies from 2004 to 2009.Using statistics and measurement method, we analysis the relationship between the company's diversification strategy and the board level of management. Through the study we found:the board of directors can influence the company diversification strategy choices. Such as the size of the board increases, the executive chairman of the centralized, layer rights of changes can promote corporate diversity, and raise the level of the ratio of the number of independent directors and increase the board meeting times, increase the number of shareholding ratio, the director of the gets pay increased, the board sets professional committee of increasing the number of diversity can reduce the level.Conversely, diversification strategy can also affect the governance board of directors.For instance, corporate diversification's level promoting can raise the size of the board,increase of the number of independent directors, reduce the rate, reduce the board of directors and the board of directors meeting times, holding ratio, reduce gets pay director ratio, prompt executives layer concentration, and reduce the board right number of sets professional committee.Because of this paper is just the normal diversity level and board governance situation, but for general analysis of different professions and different regions and different historical background and direction of enterprise, the relationship between the characteristics still exist in this aspect, still needs in the later study continued to deepen.