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A note on corporate strategy and capital structure

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  • Peter Taylor
  • Julian Lowe

Abstract

The relationships between capital structure and corporate strategy in previous U.S. and Australian empirical studies, which use different definitions of capital structure, and hence have different functional relationships, are considered. A model using the U.S. specification with the Australian data is estimated, for which previous conclusions relating to profit are confirmed. The relationship between strategy and capital structure is thus shown to be less than robust. The conclusion that debt/equity ratios of highly diversified firms are more strongly affected by firm‐level variables is supported. An explanation that the capital market rewards focused firms because they are easier to understand and price is offered.

Suggested Citation

  • Peter Taylor & Julian Lowe, 1995. "A note on corporate strategy and capital structure," Strategic Management Journal, Wiley Blackwell, vol. 16(5), pages 411-414.
    • Handle: RePEc:bla:stratm:v:16:y:1995:i:5:p:411-414
    DOI: 10.1002/smj.4250160507
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    Cited by:

    1. Eduardo Menendez-Alonso, 2003. "Does diversification strategy matter in explaining capital structure? Some evidence from Spain," Applied Financial Economics, Taylor & Francis Journals, vol. 13(6), pages 427-430.
    2. Jouida, Sameh, 2018. "Diversification, capital structure and profitability: A panel VAR approach11We are grateful to the editor and the anonymous reviewer for their valuable comments," Research in International Business and Finance, Elsevier, vol. 45(C), pages 243-256.
    3. Chkir, Imed Eddine & Cosset, Jean-Claude, 2001. "Diversification strategy and capital structure of multinational corporations," Journal of Multinational Financial Management, Elsevier, vol. 11(1), pages 17-37, February.
    4. Yang, Yang & Cao, Yang & Yang, Li-Ting (Grace), 2017. "Product diversification and property performance in the urban lodging market: The relationship and its moderators," Tourism Management, Elsevier, vol. 59(C), pages 363-375.
    5. Manel Gharbi & Anis Jarboui, 2015. "Directors` board control and diversification decision in Tunisian companies," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(12), pages 264-273, December.
    6. Löffler, Clemens & Pfeiffer, Thomas, 2013. "Centralized versus Decentralized External Financing, Winner Picking and Corporate Socialism," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79902, Verein für Socialpolitik / German Economic Association.
    7. Florence André-Le Pogamp & Frédéric Perdreau, 2009. "Stratégies de diversification et structure du capital," Revue Finance Contrôle Stratégie, revues.org, vol. 12(4), pages 5-38, December.
    8. Luca Ferrucci & Antonio Picciotti, 2013. "Il gruppo Margaritelli: dai sentieri della crescita a quelli della ristrutturazione e del Turnaround," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2013(4), pages 15-35.

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