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The impact of corporate diversification on the capital structure of publicly listed firms : Evidence from a comparison between German and Italian firms

Morsink, P.A. (2018) The impact of corporate diversification on the capital structure of publicly listed firms : Evidence from a comparison between German and Italian firms.

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Abstract:This study examined the impact of corporate diversification on the capital structure by making a comparison between German and Italian publicly listed firms. Firms were sorted into clusters of firms by their degree of product diversification (focused, moderate diversified and conglomerate) to explain the differences in corporate financial behavior. Ordinary least squares (OLS) regression analysis was conducted. Firstly, this study found an insignificant impact of corporate diversification on the capital structure. Secondly, this impact on the capital structure differs across degrees of product diversification. German focused firms had a positive significant impact on leverage, whereas a negative significant impact was found for Italian focused firms, Italian conglomerates and German conglomerates. The differences in GDP growth and corporate tax rates between Germany and Italy did not make a considerable difference in the comparison, measured by non-debt tax shields. There were no significant differences found using year and industry control. In order to test the endogeneity problem, an additional regression with one-year lagged independent and control variables was conducted. These results were consistent with the initial OLS regressions, suggesting that corporate diversification did influence the capital structure and not vice versa.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/76698
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