DIVERSIFICATION STRATEGY, CAPITAL STRUCTURE, AND THE ASIAN FINANCIAL CRISIS (1997-1998): EVIDENCE FROM SINGAPORE FIRMS

摘要

We use agency theory to predict the influence of related and unrelated product diversification on a firm's level of debt financing. Further, we argue that the link between diversification and capital structure is moderated by the environment in which firms operate. Using SAS PROC MIXED, we fit a mixed-effects model to our unique six-year longitudinal dataset (1995-2000) of 245 publicly listed Singapore firms. Our data spans the period of the Asian Financial Crisis (1997-1998). We find that firms pursuing unrelated product diversification take on less debt financing in stable environments, but more debt financing in dynamic environments. Using longitudinal structural equation modeling, we find a reciprocal relationship between a firm's product diversification strategy and its debt financing level.