The Influence of Diversification on Corporate Performances

摘要

In this paper,we have analyzed the effects of diversification on corporate performances. The investigation has been performed using panel data procedure for a sample of 320 Chinese companies listed on the Shanghai Stock Exchange in the period from 2001 to 2006. Using three distinct measures of corporate performance and four measures of diversification and controlling for leverage, firm size,growth opportunities,liquidity,and industry, the regression results show that,in general,the relation ship between diversification and corporate performance is negative. We also find that related product diversifica tion has positive and significant effects on corporate per formance; unrelated product diversification has negative and significant relation with performance. For Chinese listed companies,we suggest that the implementation of the diversification strategy should be cautious.