Diversification, capital structure, and performance: A simultaneous equation approach

Jouida, Sameh; Hellara, Slaheddine

doi:10.1002/mde.2874

Cited by 9 publications

(6 citation statements)

References 77 publications

(170 reference statements)

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“…There is no uniform DOI indicator in the existing literature. Lee and Kwok (1988) state that there is no generally accepted single DOI indicator and some DOI indexes emphasize structural characteristics: i.e., the number of countries in which the firm has subsidiaries (Burgman, 1996), or the number of its foreign subsidiaries ( Akhtar, 2005;Jouida & Hellara, 2018;Park, Suh & Yenug, 2013), while some DOI indexes focus on performance characteristics, i.e., the ratio of foreign sales to total sales (FSTS) (Aoun & Heshmati, 2008;Reeb, Kwok & Baek, 1998;Singh & Nejadmalayeri, 2004), or the ratio of foreign assets to total assets (Reeb, Kwok & Baek, 1998). In terms of international diversity indicators, Jouida and Hellara (2018) apply one minus the Herfindahl Hirschman Index (HHI) of foreign assets to total assets concentration as DOI index and Jamg (2017) uses one minus the HHI foreign sales to total sales concentration as a proxy of DOI, or geographic diversification (GD) index.…”

Section: Doi Indexmentioning

confidence: 99%

“…Our second DOI proxy is geographic diversification (GD), which is used to understand the effect of international diversification on LEV and COC. Following Jouida and Hellara (2018), we use one minus the Herfindahl Hirschman index of foreign assets to the total assets concentration to calculate GD.…”

Section: Explanatory Variables: Degree Of Internationalization (Doi)mentioning

confidence: 99%

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Degree of Internationalization, Financial Structure and Cost of Capital: Evidence from Emerging Taiwan

Chang

D’Arcy²,

Hou³

et al. 2022

AFR

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The debt structure of companies in Developing and Emerging Economies (DEEs) is significantly different from that of companies in the developed countries. This study examines the effect of degree of internationalization (DOI) on leverage ratio (LEV) and cost of capital (COC) in DEE setting by using a sample of Taiwan listed companies. Our results show that DOI has a significant positive impact on short-term debt as well as a significant negative impact on long-term debt. Therefore, it appears that DOI has a substitution effect in DEE companies. In summary, our results indicate that DEE firms do not have the advantage of participating in the international financial market.

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Section: Doi Indexmentioning

confidence: 99%

Section: Explanatory Variables: Degree Of Internationalization (Doi)mentioning

confidence: 99%

Degree of Internationalization, Financial Structure and Cost of Capital: Evidence from Emerging Taiwan

Chang

D’Arcy²,

Hou³

et al. 2022

AFR

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“…As one of the investment strategies, institutional investors can drive up performance. In most studies, corporate diversification has been used as an independent variable given capital structure (Monteforte & Staglianò, 2015;Jouida & Hellara, 2018) and as well firm's performance (Phung & Mishra, 2016); (Salma & Hussain, 2018). While examining the capital structure of the firm, corporate diversification was treated as a dependent variable (Goranova et al, 2007;Phung, Phan, Nguyen, & Le, 2016;Gharbi & Jarboui, 2017).…”

Section: Mediating Role Of Corporate Diversificationmentioning

confidence: 99%

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Tanui¹

2021

JAREAS

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Purpose: The study aimed at examining the moderating effect of capital structure in the indirect relationship between institutional ownership and financial performance through corporate diversification of listed firms at the Nairobi securities in Kenya. Approach/Methodology/Design: Post positivist research paradigm and explanatory research design guided the study in which 35 listed firms from 2003 to 2017 were included. Findings: There was a significant interaction effect between capital structure and institutional ownership on financial performance through corporate diversification. The study extended market power theory by examining institutional ownership structure given that corporate diversification is not only a source of power to drive a firm’s performance. Practical Implications: Institutional investors provide equity capital that is collaborated with the firm’s capital structure. As a result, there exist sufficient resources to take on diversification strategy despite this translating to a smaller amount in terms of financial performance. The study had implications on Market timing theory which opines that market timing is a ‘first order determinant’ to aid in selecting a suitable form of financing given debt and equity. Ideally, the preferences of different owners in the firm would affect the choice between debt and equity financing. Originality/value: Investigation of the interaction effect between capital structure and institutional ownership on financial performance through corporate diversification.

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“…Institutional and foreign ownership have been linked directly to corporate diversification by (Gharbi & Jarboui, 2017) and respectively. Moreover, corporate diversification has been linked to capital structure (Monteforte & Staglianò, 2015); (Jouida & Hellara, 2018); (Nzioka, 2017). Despite that studies have been conducted regarding ownership structure concepts, capital structure and corporate diversification, more need to be done.…”

Section: Moderating Role Of Capital Structurementioning

confidence: 99%

Effect of Ownership Structure on Corporate Diversification of Listed Firms in Kenya

Tanui

Yegon

Bonuke

2019

SJOM

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Purpose - This paper aimed to examine the moderating role of capital structure in the relationship between institutional and foreign ownerships on corporate diversification of listed firms at the Nairobi Securities Exchange, Kenya. Design/Methodology - The target population comprised of all the 65 listed firms at Nairobi Securities Exchange in Kenya. However, the inclusion criteria were based on all firms listed at the NSE from 2003 to 2017. Findings - Capital structure significantly moderated the relationship between institutional ownership and corporate diversification. However, there was a statistically insignificant moderating effect of capital structure in the relationship between foreign ownership and corporate diversification. Practical Implications - As to increase diversification, listed firms are suggested to have low levels of capital structure and institutional ownership. Furthermore, low levels of foreign ownership and high capital structure is vital in attaining high diversification levels. Originality - The study contribution is the moderating effect of capital structure in institutional ownership - corporate diversification linkage.

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Diversification, capital structure, and performance: A simultaneous equation approach

Cited by 9 publications

References 77 publications

Degree of Internationalization, Financial Structure and Cost of Capital: Evidence from Emerging Taiwan

Degree of Internationalization, Financial Structure and Cost of Capital: Evidence from Emerging Taiwan

Effect of Institutional Ownership on Financial Performance in Kenya: Moderated Mediation Role of Capital Structure and Corporate Diversification

Effect of Ownership Structure on Corporate Diversification of Listed Firms in Kenya

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