Political Connection,Diversification And Firm Performance

As a part of China's economy,the listed private enterprises play an important role in the increasing development of the economy.The enterprises' value and business performance are closely related to the diversification strategy and political relationship.The diversification strategy carried out by enterprises,which is based on the business situation and development background,will have impact on the firm performance,so does the political connection.This paper will analyze and summarizes the related literature at home and aboard,with the relevant economic date of Chinese listed private enterprises' annual reports from 2011 to 2014 and the date in CSMAR.We study the diversification of the enterprise spillover value,the relationship between diversification and corporate performance,and the political connection on business performance and diversification business impact.In constructing the evaluation index of diversification,we divided the indicators into two parts,one is diversification width and the other is diversification depth,the number and proportion of the industry which enterprises to participate in HHI.This paper also examines the level and rate of political connection,that the listed private enterprises have.In addition,there are other control variables,such as firm size,leverage,and so on.We find that,the enterprises' value may be discount or premium by diversification,but if an enterprise continue to diversify,the value spillover will be reduced.Through 2SLS method,the results show that,Political connection and diversification has a stronger influence on the diversified listed private enterprises sample than on the population sample.The industry number of diversified companies is sticky in short term,and nearly not affect the firm performance.But there will be an interaction between the diversification depth and corporate performance,it means that enterprise will pay attention on some productive industry to get more profit,and this action can have influence on its performance.The performance of different periods also brings different effects on the depth of diversification.The political relevance in the short term will have an impact on corporate performance,but does not affect the enterprises'diversification.According to the research conclusions,this paper draws the relevant fact and suggestions,in order to improve the development of private enterprise,diversification strategy,and make contributions to political demands,enhance the marketing competitiveness of listed private enterprises,and promote the healthy development of Chinese market economy.