Research On Relationship Between Diversification Strategy And Corporate Performance Of Chinese Listed Real Estate Companies

Diversification strategy is always the focal point of business circles and theory circles, after its birth. With the popularity of diversified business model in enterprise development, the relationship between diversification and corporate performance has been the topic of the theory of debate. Domestic and foreign scholars used the empirical analysis method to study the relationship between China’s real estate business diversification and company performance, the result is not consistent, but the results of their study is divided into three categories: diversification premium to diversification discount, diversification and corporate performance not related.The real estate industry as one of the pillar industries in China, its development is related with beneficial to the people’s livelihood. The real estate industry has been the impact of the subprime mortgage financial crisis and the recent macro-economic control, China’s real estate industry downturn and increasingly competitive. Environment of the real estate industry has a larger transformation, many companies began to reposition itself, planning diversification or unrelated diversification, some companies have a diversified business.The relationship between diversification and corporate performance, especially for the real estate industry, has become a problem we should focus on.The article use the listed real estate company in the2008-2010three-year financial data as the study sample, using the empirical analysis method to study the relationship between China’s real estate business diversification and company performance. In the process of empirical research, the extent of corporate diversification is the Herfindhal index to measure, corporate performance use return on assets ROA, return on assets ROE and earnings per share EPS to measure. The results show that:the existence of listed real estate company diversification discount phenomenon, that is a diversified management and company performance is negatively correlated. The best performance in the different types of real estate companies is the single business enterprise, specialized business performance is better than diversification, related diversification corporate performance is superior to unrelated diversification type. Finally, summing up the results of the empirical analysis and give some advice to the current real estate enterises.