Diversification and Performance of Pharmaceutical Enterprises – Empirical Analysis Based on China’s A-Share Pharmaceutical Listed Companies

Diversification is one of the important strategies in the growth process of enterprises. At present, the academic community has not yet reached a unanimous conclusion on the relationship between diversification and corporate performance. Taking 31 China’s A-share pharmaceutical listed companies from 2018 to 2022 as a sample, this paper empirically analyzes the impact of diversification on the performance of pharmaceutical companies. Empirical results show that overall, diversification has a negative impact on the return on equity (ROE) of a company, but it is not significant. However, from the perspective of different views, related diversification leads to a significant decrease in the company’s ROE, while unrelated diversification leads to a significant increase in the company’s ROE. Using return on assets (ROA) as a substitute variable for ROE to conduct a robustness test on the model, the results remain consistent. This indicates that overall diversified operations have a negative effect on the performance of pharmaceutical companies, but it is not significant. Related diversified operations have a significant negative impact on the performance of pharmaceutical companies, while unrelated diversified operations have a significant positive impact on the performance of pharmaceutical companies. Based on the empirical results, the performance improvement strategies of pharmaceutical manufacturing enterprises are proposed from the perspectives of maintaining moderate diversification and focusing on building core competitiveness. This study enriches the research content of diversification, provides support for the evaluation of the implementation effects of diversified strategies for pharmaceutical companies, and can also provide a basis for how to choose diversified strategies.