Research On The Impact Of Dynamic Adjustment Of Diversification Level On Corporate Performance

With the changes in the economic environment and the adjustment of the industrial structure,the uncertainty of the external market environment faced by the enterprise has increased.More and more enterprises realize that the inflexible business strategy is difficult to adapt to the uncertain external market environment.In recent years,many companies have restructured their own corporate resources and adjusted their business structure through investment and mergers and acquisitions.The process of business structure adjustment involves the dynamic adjustment of the level of enterprise diversification.In the process of dynamic adjustment of the level of diversification,enterprises need to effectively allocate resources and manage various business operations,so as to better create or increase enterprise value and bring about the improvement of enterprise performance.Therefore,what kind of impact will the dynamic adjustment of the level of diversification have on its performance and the mechanism behind it is a topic worthy of study.This paper takes Shanshan Co.,Ltd.’s dynamic adjustment process of diversification level from 2011 to 2021 as an example,and mainly studies the effect of dynamic adjustment of diversification level on the short-term market performance and long-term financial performance of enterprises.Combined with principal-agent theory,resource-based theory and dynamic capability theory,it explains the effect mechanism of dynamic adjustment of diversification level on enterprise performance.This paper firstly measures the level of diversification in the development process of Shanshan Co.,Ltd.through three diversification indicators;and divides three stages of dynamic adjustment of the diversification level according to the fluctuation of the diversification indicators,as the basis for subsequent analysis.Then through the event study method and principal component analysis method,analyzes the short-term market performance and long-term financial performance impact of Shanshan Co.,Ltd.diversification level dynamic adjustment process.The analysis found that Shanshan Co.,Ltd.had good market performance and financial performance in the first and third stages of focusing on the development of the main business,but performed poorly in the second stage of related diversified development.In addition,the dynamic adjustment of the diversification level mainly affects the financial indicators related to the profitability and growth ability of the enterprise,and then has an effect on the overall financial performance.At the same time,the change of enterprise growth ability will also affect the timing of diversification strategy adjustment.Finally,the mechanism of the impact of dynamic adjustment of diversification level on corporate performance is explained from three aspects: the non-efficient investment behavior,the management of core resources,and the development of dynamic capabilities.The conclusion of the study is that the dynamic adjustment of the level of diversification involves the alternation and conversion of the development strategy of diversification.In the process of diversification,enterprises should pay attention to the principal-agent problem to avoid the adverse impact of excessive investment and cross-subsidy between businesses on corporate performance;at the same time,fully use the favorable impact of core resources on corporate performance.In addition,enterprises should attach importance to the cultivation and development of dynamic capabilities in the process of dynamic adjustment of the level of diversification,so as to realize the timely identification and effective allocation of enterprise resources.The main contributions of this paper are: on the one hand,it provides a reference for the operation management in the process of dynamic adjustment of diversification level in practice;On the other hand,this paper uses case study method to explore the effect and mechanism of the dynamic adjustment of the diversification level on the enterprise performance from the dynamic perspective,which further expands and enriches the research of the enterprise diversification management.