Research on the Relationship between Corporate Governance Structure and Diversification Strategy

Abstract

Based on agency theory, this paper studied on the relationship between corporate governance structure and diversification strategy. Choosing 520 listed companies in Shanghai stock on December 31, 2009 as research samples, the paper did an empirical study on the impact of corporate governance structure on diversification strategy. The result showed that concentration of ownership, proportion of legal person shares and proportion of independent directors all had negative correlation with diversification degree significantly; proportion of state owned shares, board size and management compensation all had positive correlation with diversification degree significantly. The empirical result confirmed the theoretical hypothesises and supported the explanation of diversification discount under agency theory.