Does product diversification matter on capital structure decisions? An empirical study of manufacturing companies in Indonesia

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Abstract

Up till present, there is no convergence conclusion about the relation of product diversification and capital structure. There are three kinds of empirical finding of the relationship: There is positive significance, there is negative significance, and there is not significance. This study aims to examine the influences of product diversification on capital structure decisions. We employ a panel data from 83 companies of 13 manufacturing industries that listed in IDX covering the period 2001 - 2010. We find that both variables: The category of product diversification (CPD) and the degree of relatedness of product diversification (DRD) has a significant negative influence on the capital structure. This finding clearly supports the agency theory.

Original languageEnglish
Pages (from-to)4703-4717
Number of pages15
JournalInternational Journal of Applied Business and Economic Research
Volume13
Issue number7
Publication statusPublished - 1 Jan 2015

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