Research On The Peer Effect Of Enterprise Diversification

Since the 20th century,more and more listed companies in China have implemented diversification strategy.Enterprise diversification means that enterprises are not limited to a single product or industry,but implement crossproduct and cross-industry management.Many of the motivations for enterprises to implement diversification are to pursue the improvement of enterprise value brought by diversification,to obtain better investment and financing advantages,and to enhance the brand value of circulation enterprises;However,many of them are managers who choose diversification in pursuit of their own interests,or some politically connected enterprises will respond to the call of the government to expand the diversification brought by new business.And as China’s economic development continues to move in the direction of high quality,low pollution,intelligence and digitalization,the traditional development model of some enterprises has been challenged.The traditional business of these enterprises can no longer provide sustainable impetus for their development,and some of them will adopt diversified development strategies.However,diversification is like a double-edged sword for enterprises.It will bring risks to the overall operation of enterprises while including opportunities.Therefore,the enterprise management must analyze the risks while seeking diversification.At present,the research on enterprise diversification is mostly based on the assumption of independent decision-making of the company,starting from various economic indicators.However,managers may face the problem of information asymmetry when making decisions,so managers have the motivation to observe and imitate the decisions of other enterprises to reduce the risk of decision failure.This kind of interaction among various subjects in a group is called "conglomeration effect".This effect was first applied to sociology and education,but more and more scholars have applied the theory of conglomeration effect to the field of corporate finance recently.In view of this,this paper extends the behavior of corporate diversification to the field of "conglomeration effect" for the first time,providing a new perspective for future research on corporate diversification.This paper selects A-share listed companies from 2003 to 2021 as the research sample,and first studies the existence of the same-group effect of the diversification of listed companies in the same region.The results show that there is a significant regional same-group effect in the diversification of listed companies in China,that is,the diversification behavior of listed companies will be significantly affected by the diversification of other listed companies in the same region.Secondly,this paper further explores the imitation mechanism of regional conglomeration effect of corporate diversification and finds that:(1)China’s listed companies’ regional conglomeration effect of diversification follows the imitation law of "first inside then outside".The regression of "property right nature" and "chain director network centrality" in this paper confirms this law.Among them,the regression of the nature of property rights found that state-owned enterprises would imitate other state-owned enterprises in the same region,and non-state-owned enterprises would imitate other non-state-owned enterprises in the same region,and enterprises with different property rights would not imitate each other;The regression of the network centrality of chain directors found that: enterprises with high centrality will imitate other enterprises with high centrality in the same region,and enterprises with low centrality will imitate other enterprises with low centrality in the same region,and enterprises with different centrality will not imitate each other.(2)The regional conglomeration effect of diversification of listed companies in China follows the law of "logical imitation".The regression results of the enterprise scale in this paper show that the leading enterprises in the same region will not imitate other enterprises,and the non-leading enterprises will imitate other enterprises.Then,this paper studies the factors that affect the regional conglomeration effect of listed companies’ diversification,and finds that:(1)the higher the financing constraints faced by enterprises,the stronger the regional conglomeration effect of enterprises’ diversification.(2)The lower the concentration of equity,the stronger the regional conglomeration effect of diversification.Finally,according to the conclusions,this paper gives suggestions to listed companies and regulators.For regulators,the conclusions of this study can help government agencies to further understand the logic of enterprise diversification,thus providing some reference for them in formulating policies.For listed companies,the conclusions of this study can help improve the rationality of their diversification decisions.For example,for small and medium-sized enterprises with high information collection costs,they can refer to the decisions of the same group of enterprises when making diversification decisions to reduce the risk and cost of decision-making.