Manager Characterstics,the Diversification Of Investment And Enterprise Performance Research

Diversification is one of the most important investment strategies in enterprises, more and more enterprises, especially listed companies started to implement this strategy. In our country, many local enterprises have paid attention to investment diversification strategy since1980s. Enterprise managers are responsible for deciding and implementing enterprise strategies, making investment, financing and resource allocation decisions according to the current situation. Enterprise managers play a key part in investment diversification strategy. Upper Echelons Theory states that enterprise managers’ characteristics will affect their decision and have further influence on enterprise performance, it was proved by a large number of theoretical and empirical literature researches at home and abroad. Therefore, the article bases on the variable of managers’ characteristics, research how managers characteristics influence enterprise investment diversification strategy, and take a further step on researching how manager characteristics affect enterprise performance through investment diversification.This paper reviews Agency Theory, Upper Echelons Theory and Strategic Management Theory, summarizes the related literature at home and abroad, did analyses on the relationship among managers characteristics, investment diversification and performance, and proposed the research hypotheses. On that basis, this paper selects257manufacturing listed companies from2007to2011as samples, and empirically analyzed how Manager’s risk preference, professional background, share holding ratio and the term of their office affect the diversification strategy, and the different performance of a company with managers with different characters.First of all, this paper empirically studies the influence of manages’ risk preference, professional background, the shareholding ratio and the managers’term of the office to the diversification of investment. The study finds that the managers’ risk preference has significant positive influence on the listed company investment diversification degree, the shareholding ratio and the managers’term of office has significant negative influence on investment diversification.Secondly, this paper analyses how the different risk preference, professional background, the shareholding ratio and the term of position influence enterprise performance through the investment diversification chosen by enterprise managers. The study finds that the investment diversification degree chosen by high risk preference managers reduces the enterprise performance; the managers of high shareholding ratio and long term choose the investment diversification improve enterprise performance.Thirdly, this paper further distinguishes the property rights of enterprises, according to the biggest controlling shareholders; we divided the sample enterprise into state-owned enterprises and non-state-owned enterprise. We analyzed the managers’ different risk preference, professional background, the shareholding ratio and the term of office on how to influence the enterprise performance through enterprise investment diversification with these two different enterprise property rights, From the results of the analysis, this paper finds that with these two different enterprise property rights, the investment diversification degree chosen by high risk preference managers reduces the enterprise performance; the investment diversification chosen by the managers of high shareholding ratio and long term improve enterprise performance. In non-state-owned holding enterprises the investment diversification degree chosen by managers with financial and economics background improves the enterprise performance, but there have no significant influence in state-owned enterprises.At last, based on the above analysis and conclusions, the article puts forward relevant suggestions for reference to relevant institutions. Enterprise can consider using the strategy of increasing the shareholding ratio, closely combining manager’s personal benefit, share holder benefit and enterprse’s performance to make upper lever manager make reasonable decision; when choosing managers, non-state-owned enterprises should pay attention that long-term investment strategy of the enterprise agree with the professional background of the manager candidates so the candidate chosen will be beneficial for the continuous development of the enterprise in the long run.