Research On Institutional Environment,Managerial Power And Diversification

Today,with the rapid development of social economy,the market has become increasingly competitive.In order to occupy a place in the fierce competition,many enterprises have chosen the way of diversification to realize the sustainable development of the enterprise.Indeed,diversification strategy does have many benefits from previous studies,such as creating synergistic effect of tax,finance,management,and other aspects,making full use of the residual cash flow.It can also expand enterprise scale and reduce enterprise bankruptcy risk,etc.But with the continuous change of the external capital market,product market and diversification of the company internal coordination mechanism running,diversified company gradually exposed its inherent shortcomings and incompatible with the constant development and changes in the external environment.A large number of domestic and foreign empirical results also demonstrated that diversification has often resulted in the phenomenon of derogation of company value.However,under such a background,a large number of diversified company in the world still exist and emerge.In recent years,China was in the boom period for the development of the diversified company.The development tendency of large group enterprises has formed a numerous diversified companies.Diversified group enterprises in our country increasingly occupy an important leading position.This raises a question: since diversified firms often resulting in derogation of company value,why are there still a large number of diversified companies continue to exist and develop? What are the factors that affect the diversification strategy of enterprises? Based on the existing literature research,this paper puts forward that the institutional environment and the managerial power have a significant impact on the diversification of enterprises.In order to study the influence of institutional environment and managerial power on the diversification,this paper studies the problem of the three dimensional framework of the " institution-governance-enterprise".First of all,this paper reviews the domestic and foreign scholars on the institutional environment,the managerial power and corporate diversification on the basis of the study,to make a review of the relevant research.Then,based on the relevant theoretical analysis,the paper collects the annual data of A-share listed companies in China from2010 to 2014 to empirical study the relationship between institutional environment,managerialpower and diversification.And we got the following conclusions:(1)The companies with stronger managerial power tend to diversify.The regression results show that the index of managerial power is positively correlated with corporate diversification,which means that with the enhancement of managerial power,the higher the degree of enterprise diversification;(2)The institutional environment has restrictive effect on the the relationship between managerial power and diversification.The model adds the multiply item of institutional environment and managerial power to make empirical study.The results of the study showed that the institutional environment has a certain restrict effect on the behavior of managers who use their own power to diversify to gain private interests.The area of the company located has more perfect institutional environment,the more constrained by the managerial power,the lower degree of diversification of enterprise.Finally,based on the results of the study,this paper puts forward some corresponding countermeasures and suggestions on enterprise excessive diversification,including the optimization of the diversified company internal corporate governance structure and governance mechanism to reduce diversified company internal external problems;establishing the perfect legal system of investor protection to promote the development of multi-angle capital market,introducing multistage external market supervision and restriction mechanism;establishing effective company internal control system and incentive mechanism,straightening out the management system of diversified companies to inhibit excessive diversification.