More-money and less-cash effects of diversification: Evidence from Japanese firms

Tatsuo Ushijima

Japan and the World Economy, 2020, vol. 56, issue C

Abstract: This study provides evidence for the more-money and less-cash effects of diversification based on the industry-adjusted debt and cash holdings of Japanese firms. Diversified firms are more leveraged while holding less cash than focused firms in the same industries, even after controlling for the standard determinants of capital structure, unobserved heterogeneity, and the endogeneity of firm scope. The study also finds that these effects are mitigated when a firm has an ownership structure that insulates managers from capital market pressures for risk-taking. This pattern suggests that the risk-taking incentives of managers differentiate the effect of diversification on finance across firms.

Keywords: Corporate diversification; Risk-taking; Leverage; Cash holdings; Japan (search for similar items in EconPapers)
JEL-codes: G32 L25 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The More-Money and Less-Cash Effects of Diversification: Evidence from Japanese firms (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:56:y:2020:i:c:s0922142520300414

DOI: 10.1016/j.japwor.2020.101040

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