Diversification and Capital Structure: Some International Evidence |
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Authors: | Low Pek Yee Chen Kung H. |
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Affiliation: | (1) Department of Accountancy, City University of Hong Kong, Hong Kong;(2) School of Accountancy, The University of Nebraska-Lincoln, Lincoln, NE 68588-0488, USA |
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Abstract: | This study examines the effects of international and product diversification on capital structure with 232 firms from 30 countries. Results for the full sample show that international diversification is negatively related to financial leverage, but further analyses indicate that this is mainly attributable to US firms. For non-US firms, we fail to find a significant relationship. Results also show that product diversification is positively related to financial leverage, indicating that such diversification allows firms to reduce their risks, thereby enabling firms to carry higher debt levels. |
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Keywords: | international diversification product diversification financial leverage capital structure |
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