An Empirical Study On Performance Of Diversification M&A Of China’s Listed Companies

Diversification M&A is an important approach to achieve the goal of enterprise-scaleexpansion andthe diversification strategy. However, it is still a question in academiccommunity that whether thediversification M&A can bring the expected incomes andwhether the enterprise performance can beimproved. According to the degree ofassociation with the company’s existing business, diversity is divided into two types：related diversification and unrelated diversification. Diversification of different types ofmergers and acquisitions, its intrinsic mechanism is different, the underlying motivation ofcompanies in M&A decision-making is also different，resulting in different effects on theM&A performance.First, this paper gives a broad overview of the present results about the diversificationM&A performance study. Then describes the diversification of domestic listed companiesin M&A market situation from the macroeconomic environment, capital marketenvironment and industrycharacteristics， in close connection with the theory and reality.On this basis, from2006to2008in Shanghai and Shenzhen diverse M&A sample andclassification, the use of principal component analysis to construct the performanceevaluation system to measure related diversification of long-term performance of mergersand acquisitions and unrelated diversification mergers and acquisitions. The study foundthat: related diversification M&A business associated with strong, easier to achievesynergy for M&A performance; due to weak business association rather than relateddiversification acquisitions greatly increased the cost of management, and managementblindly bigger motivation increase in agency costs， it undermine the M&A performance in the long time。Enterprises should take full account of the risks and benefits ofdiversification M&A, taking into consideration the main and side with the M&A targets,industry relevance and strategic match, in order to make rational acquisition decisions.