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Analysis Of The Influence Of Enterprise Diversification Strategy On Enterprise Value
Sha, Hongwei
Sha, Hongwei
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Thesis/Dissertation
Date
2024-01
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Business Administration/Finance
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DOI
http://dx.doi.org/10.34944/dspace/10252
Abstract
The diversification strategy is a growth strategy commonly adopted by modern enterprises. Since the reform, the diversification process of Chinese enterprises has been
ups and downs in over 30 years. It is started from 1980s, the diversification wave is at its
peak in the 1990s, and the business occurred with obstruction in the late 1990s. Entering
the 21st century, Chinese companies are still hovering at the fork between focusing on the
main business and diversifying. It is still being determined which of the two is better for
enhancing corporate value. Review past studies, the relationship between diversification
and corporate value has mainly focused on a specific industry, and there are fewer studies
on all A-shares companies.
Based on that, our research revolves around the core issue: the relationship between
diversified management and corporate value. After reviewing the related literature at
domestic and abroad, we define the two key research concepts of diversification and
corporate value. It summarizes the theoretical and empirical research results on the
relationship between "diversification-corporate value". Based on existing research, this
study first conducts a panel regression analysis on the companies in the A-share market.
Then it conducts a heterogeneous analysis of the top 9 industries to compare the
relationship between corporate diversification and corporate value among different
industries. To clarify whether the influence relationship is consistent and which industries
are suitable for diversification.
In response to the above research questions, this study uses the ten-year data of
China's A-share listed companies from 2012 to 2021. We use STATA software for panel
data regression analysis. It shows a "diversification discount" relationship between the
overall diversification of enterprises in China's A-share market and corporate value. The
higher the degree of enterprise diversification, the lower the enterprise value. The reason
for this may be that the resource allocation capabilities of most enterprises in China need
to be optimized urgently. In addition, for most manufacturing industries, diversification
negatively impacts corporate value enhancement, while for some service industries,
diversification benefits corporate value enhancement.
The practical enlightenment of this study to Chinese enterprises is that enterprises
need to consider diversification strategies carefully and dialectically view the complex
impact of diversification on corporate value. Enterprises should focus on building core
competencies. Only by forming a good level of resources and market forces can they form
solid support for implementing the diversification strategy to promote corporate value
through diversified operations.
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