Business Diversification Strategy, Board Control Functions and Corporate Performance

Diversification discount accrues to personal gain from the managers of moral hazard and therefore strengthen the control functions of the board of directors has become an important guarantee for safeguarding the interests of shareholders according to agency theory perspective. Based on the control functions of the Board, the study explored the moderating roles of board size, board behavior, characteristics and board incentive mechanism on the relationship between diversification strategy and corporate performance. Empirical results show that the diversification strategy implementation process, board size, board stock holding rate, the Board of Directors receive remuneration rate control function to play a limited role in the promoting board control function, binding and inhibition of managers opportunistic behavior and moral hazard. However behavioral characteristics of the board control functions are helpful in improving the effectiveness of board control function. Research findings is beneficial in realizing the strategic value of diversification strategy and as to help the board to achieve a certain control functions play an important reference value.