Diversification And Firm Value

The strategy of diversification is one of the important strategies selected in the process of the development of modern enterprises.With the opening up of China's capital market and the maturity of investors and market trading conditions,there have been a number of diversified mergers and acquisitions,but often the results are not satisfactory.Predecessors' research on diversification and corporate value is often confined to observing the static stock value of an enterprise,while ignoring the long-term dynamic changes of the enterprise.There are endless debates and divergent views on diversification of "discount" or "premium",but less attention is paid to the "U-shaped relationship"of diversification to corporate value�That is,the impact of diversification on corporate value should be quadratic and non-linear.In addition,the diversified endogenous issues raised by foreign scholars are also worth discussing.Based on the systematic review of the theory of corporatediversification,this paper takes the Principal-agent theory as the basis,integrates the characteristics of Chinese enterprises,and combines the changes in the macroeconomic environment within the time window,to conduct a relationship between the diversification of listed companies in China and their corporate values.The main purposes of this paper are as follows:The first is to study the direct and overall impact of diversification on corporate value.The second is to discuss the relationship between diversification and corporate value,whether it is a simple linear relationship or a quadratic U-shaped relationship.The third is to explore the causes of corporate diversification,whether there is a self-selection behavior in corporate diversification.The fourth is to provide academic explanations for the diversification results of Chinese enterprises and provide a theoretical basis for business operators by analyzing whether the differences in property rights in China's unique background can affect the diversification of the value of the company.This paper selects 2194 listed company data from 2012 to 2016 as a sample,strictly classifies the company's business according to Wind secondary industry code,establishes the industry affiliation table,and then uses Python to dealing with related data.After the excess value of each company calculated(with the median values of industries being as media),the paper establishes a dynamic model to study the "U-shaped" relationship between diversification and corporate value according to the increment of corporate value.Referring to the practice of previous generations,the paper uses the generalized autoregressive conditional heteroscedasticity model,�GARCH(1,1)to measure the conditional variance of changes in macroeconomic variables,define macroeconomic variables,and study the influence of macroeconomic uncertainty on the value of diversified firms by adding interactive terms.Diversified dummy variables are constructed to study the diversified self-selected features in Logit model.According to the nature of the sample's property rights,a group study was conducted to analyze the performance of the above issues in the sample groups of state-owned and non-state-owned enterprises in China.The main conclusions of the research and analysis in this paper are as follows:First,the impact of diversification on corporate value has an "inverted U-shaped" relationship.That is,moderate diversification can enhance corporate value and over diversification can lead to"discount".This phenomenon is not significant in state-owned enterprises,but it is very obvious in non-state-owned enterprises.Second,diversification has self-selection features.After controlling the relevant characteristics of the company,the writer found that corporates who are with lower value are more likely to diversify,which means that divarication sometimes is a kind of self-help behavior.Third,due to the existence of macroeconomic uncertainties,the impact of diversification on corporate value will be hedged.Throughout the analysis,company size,company age,financial leverage,institutional shareholdings,available resources,and managerial capabilities all affect the corporate value of diversified companies to varying degrees.This also has some help in studying the factors thata affect the value of diversified companies.