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Effect of diversification on capital structure

Maurizio La Rocca (), Tiziana La Rocca, Dionigi Gerace and Ciorstan Smark

Accounting and Finance, 2009, vol. 49, issue 4, 799-826

Abstract: Previous empirical financial studies have paid little attention to the role of diversification strategy on financial choices. This study analyses the financing strategies of multibusiness firms, suggesting the relevance of sorting the diversification phenomena into its related and unrelated components. The implications of our findings are important because they explain earlier contradictory results on capital‐structure determinants and offer an explanation of how the degree of product specialization/diversification and the direction of diversification (related or unrelated) translate into different corporate financial behaviours.

Date: 2009
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Handle: RePEc:bla:acctfi:v:49:y:2009:i:4:p:799-826