Research On The Influence Of Diversification On Enterprise Value Of Xinjiang Machinery Research Institute

Diversification is one of the important strategies for the development of modern enterprises.Many enterprises at home and abroad have conducted diversified operations.Although China's capital market has been gradually opened up,the investors tending to be mature and market trading conditions constantly improving,there are still many failure cases in China's diversified operations.Domestic and foreign scholars have done a lot of studies on the impact of diversification on enterprise value,but no consensus has been formed.There are mainly three conclusions:diversification discount,diversification premium and diversification irrelevant.As for how diversification affects the value of enterprises,empirical analysis and case studies have been conducted from the aspects of enterprise capital cost,enterprise risk,scope economy and other aspects at home and abroad,but no consistent conclusions have been reached.In this context,it is of great theoretical and practical significance to study the impact of diversification on enterprise value.By combining theoretical research with case study,this paper analyzes and studies the influence path of Xinjiang Machinery Research Institute on enterprise value.First of all,on the basis of consulting a large number of literature,this paper reviews and summarizes the related research of diversification.This paper illustrates “diversification premium”,“diversification discount” and “diversification irrelevant theory”.Secondly,according to MM theory,enterprise value is the market value of the enterprise,which is represented by the discounted present value of the free cash flow of the enterprise according to the capital cost.According to the calculation formula of enterprise value,enterprise value is influenced by enterprise capital cost,enterprise risk and cost.Enterprise capital cost represents the expected rate of return of investors.Enterprise risk affects enterprise value.And enterprise scope economy affects enterprise value by affecting enterprise cost.This paper mainly analyzes the ways that diversification affects enterprise value from three aspects: enterprise capital cost,enterprise risk and “scope economy”.Then this paper introduce the company profile of Xinjiang Machinery Research Institute and how it became diversity.This paper measures the enterprise value,enterprise risk,and theenterprise cost of capital to analyze the influence path of its diversification on enterprise value.The result proved that the enterprise value declined by the method of event study and tobin's Q value.The leverage coefficient and standard deviation method are used to measure the enterprise risk and found that the enterprise risk increased.ROA is used to measure“economy of scope” and found that the diversification brings uneconomic range.The following conclusions are drawn from the analysis: the diversification of Xinjiang Machinery Research Institute through cross-industry mergers and acquisitions harms the enterprise value,which confirms the diversification discount theory.The increase of capital cost will lead to the decrease of enterprise value.Due to the increase of management difficulty and the loss of main business advantage,the enterprise risk increases,the enterprise income volatility increases,and the enterprise value decreases.Xinjiang Machinery Research Institute acquisition formed a non-related diversified business model,and the significant difference in the industry led to the economic scope.Finally,it comes to the conclusion that enterprises should keep their competitive advantages,carry out diversified operation and improve their management ability,so as to provide certain reference experience for other diversified enterprises.