A Study Of How Vertical Integration Affects Value Of Agriculture And Manufacture Integration Enterprises

As the basic industry of our country, agriculture occupies the pivotal position in thenational economy. Agriculture and Manufacture integration enterprises (A&M enterprisesfor short) are professional and comprehensive enterprises that combine agriculturalproduction, processing, transportation with sales together. Usually they are the leadingenterprises of agricultural enterprises. The influence of vertical integration on theenterprise value of A&M enterprises is not only related to the agricultural enterprisesstrategic decision problem but also related to the development of agricultural industry. Thispaper researches on the influence of vertical integration on enterprise value of A&Menterprises, so this paper has its practical meaning.Vertical integration strategy is adopted by more and more enterprises to improveenterprise competitiveness, but the influence of vertical integration on enterprise value isdifferent in different industry. Vertical integration refers to the enterprise no longer onlyengaged in a certain stage of the industrial chain, but extends to multiple phases of theindustrial chain on the basis of the original business and forms a more complete system,organizing the production and operation through the internal organization instead ofexterior market. Forward integration and backward integration are two modes of verticalintegration. Vertical integration can bring benefits to enterprise, such as cost savings andimprovement of defensive and offensive market force. The costs of vertical integration arethat, the elasticity decreased, management cost rise, the rise in the cost of running in andthe demand for capital increase. From different perspectives, including economics, finance,management and value chain perspective, the enterprise value creation and valueevaluation are discussed. Economic value added is the financial indicator that conforms tothe requirement of value chain perspective to measure enterprise value.The value-added mechanism of A&M enterprises is: the reducing in transaction costand risk of contract, deep processing link enhances the degree of value-added ofagricultural products, agricultural products logistics speed and improve value chaincollaboration ability. Based on the theoretical analysis, it can be concluded that vertical integration is helpful to the value added of A&M enterprise value. This article selects VASas a measure of enterprise vertical integration degree, EVA as a measuring index ofenterprise value, introducing firm size and nature of equity as control variables, selects25A&M enterprises as sample companies, from2007to2011as the research range, empiricalmodel is established to explore the relevance between the degree of vertical integration andenterprise value in A&M enterprises. The empirical results show that the degree of verticalintegration and enterprise value in A&M enterprises has significant positive correlation.The basic conclusion is: the vertical integration is helpful to the value-added of A&Menterprises. Based on it, the author suggests that A&M enterprises should develop verticalintegration and carry out management innovation and the government should guide andsupport the development of A&M enterprises.