Abstract
The aim of this study is to analyse the financing choices of multibusiness firms, in terms of debt-maturity. The results suggest that the degree of product diversification and the direction of diversification (related or unrelated) translate into different corporate financial behaviours. In particular, diversification related or unrelated had opposite effects on debt-maturity; the former strategy has a negative effect whereas the latter has a positive influence on debt-maturity.
Notes
1For example, the credit quality (credit rating), growth opportunities, firm's profitability and size, and the age of the company are important firm-specific factors.
2In general, it has been observed empirically that relatively more debt is carried by diversified firms than by nondiversified firms (Riahi-Belkaoui and Bannister, Citation1994).
3 Related diversification is based on operational synergies related to the sharing and transfer of skills connected to tangible (plant and equipment, sales forces, distribution channels) and intangible (brand names, innovative capabilities, know-how) resources. Unrelated diversification is associated with the financial synergies hypothesis, which states that firms diversify to benefit from the economies of an internal capital market and to reduce business risk.
4I treat as endogenous the variables that are likely to be determined simultaneously along with the debt-maturity (Roi, size and tangibility). The remaining regressors are treated as exogenous.