An empirical research on relationship between corporate diversification and performance - From 1031 Chinese listed companies

Previous studies on the relationship between corporate diversification and performance have largely neglected the problem of endogeneity, only focusing on diversification's effects on corporate performance, while neglecting performance's feedback effect to diversification. In order to conduct a more reliable result, the endogeneity problem was considered in the article, which shows that there exist an endogenous relationship between corporate diversification and performance, that is to say, they are interactive. In addition, based on the characters of china's capital market, a new performance index system was built, by using the financial performance index and market performance index. Taking the endogeneity into consideration, and using There-Stage Least Squares, the relationship between diversification and corporate performance was discussed again, result suggests that the degree of diversification is positively related to market performance, but there is no evidence that the degree of diversification has a significant impact on financial performance.