Study on the Impact of Diversification Strategy on Firm Value Based on Mathematical Model

This paper studies the impact path and mechanism for diversification strategy on firm value based on mathematical model. The results show that there are two kind agency problems in diversified companies. One exists between shareholders and top management, and the other is between top management and department managers. Because of the problems, diversification alwaysleads to over-investment, which makes marginal value of capital investment decrease. This conclusion can expand the research framework of the relationship between diversification strategy and firm value in theory.