Linking corporate strategy to capital structure: diversification strategy, type and source of financing

Kochhar, Rahul; Hitt, Michael A.

doi:10.1002/(sici)1097-0266(199806)19:6<601::aid-smj961>3.0.co;2-m

Cited by 148 publications

(107 citation statements)

References 33 publications

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“…We classified the firms based on their product and/or geographic (market) diversification but we emphasize the need of developing a criterion of diversification similar to SIC to better classify the companies systemically. Entropy indices used to calculated the variable positive relationship with debt (Kochhar & Hitt, 1998) La Rocca, et al, 2009), (Harris and Raviv, 1991) Return on assets EBIT/Total assets DEPENDENT VARIABLES (La Rocca, et al, 2009), (Qureshi, 2009) …”

Section: Resultsmentioning

confidence: 99%

“…They observe lower leverage and preference for equity financing in the related diversified firms that are based on business synergies as compared to their specialized counterparts, and high leverage in unrelated diversified firms based on financial synergies (La Rocca, et al, 2009). Additionally, the firms diversifying through acquisitions are more likely to use public sources of financing while the firms accentuating internal development of new businesses depend primarily on private sources of financing (Kochhar & Hitt, 1998).…”

Section: Related and Unrelated Diversificationmentioning

confidence: 99%

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Does Diversification Affect Capital Structure and Profitability in Pakistan?

Qureshi¹,

Akhtar²,

Imdadullah³

2012

ASS

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Diversification has become a common strategy of corporate risk management along with availing other potential benefits. The intent of this study is to identify and analyze the nature of relationship that exists between diversification and capital structure as well as profitability in Pakistan. For this purpose we use the 10 years ' (2000-2009) data of all the companies of chemical and food sector listed at the Karachi Stock Exchange (KSE). We find that the diversified firms are more profitable. Using independent variables of firm size, growth and tangibility the results show that whenever significant, the relationship is associated with greater amount of debt held by the firms.

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Section: Resultsmentioning

confidence: 99%

Section: Related and Unrelated Diversificationmentioning

confidence: 99%

Does Diversification Affect Capital Structure and Profitability in Pakistan?

Qureshi¹,

Akhtar²,

Imdadullah³

2012

ASS

View full text Add to dashboard Cite

show abstract

“…There is ample empirical evidence on the way financial managers take the capital structure decision (see e.g. Kochhar (1996) and Kochhar and Hitt (1998)). The payout decision has received much less attention.…”

Section: Introductionmentioning

confidence: 99%

The dividend and share repurchase policies of Canadian firms: empirical evidence based on an alternative research design

Jong

Dijk

Veld

2003

International Review of Financial Analysis

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We empirically investigate dividend and share repurchase policies of Canadian firms. Our analysis contains two features that are uncommon in finance, while they are encountered in other fields of science. First, we use standard, simultaneous and nested logit models. The non-standard logit models are often used in recreational economics and marketing. By examining different model specifications, we test alternative descriptions of the behavior of decision-makers. Second, we use questionnaire data on firm characteristics. Collecting data by questionnaires is hardly ever done in finance, while it is the mainstream approach in sociology and organization. We have sent a questionnaire to the 500 largest non-financial Canadian companies listed on the Toronto Stock Exchange, of which 191 usable responses were returned. Our results are consistent with a structure in which the company first decides whether it wants to pay out cash to its shareholders or not. In the second stage the firm decides on the form of the payout: dividends, share repurchases or both. Payout is determined by free cash flow. The choice for dividends and repurchases depends on behavioral and tax preferences. Furthermore, the payout is less likely to be dividends if the company has executive stock option plans. Finally, we find evidence for the Brennan and Thakor (1990) model. According to this model the existence of asymmetric information amongst outsiders is associated with a preference for dividend payments over share repurchases.

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“…Borrowing money is a management issue and decision that has considerable long-term implications for churches. More important, churches of various denominations, as well as their stakeholders, use the level of debt to evaluate financial stability and performance (Jordan, Thompson, and Malley, 1991;Eltringham, 1994;Kochhar, 1996;Kochhar and Hitt, 1998;O'Brien, 2003;"Keeping Faith," 2004;Daniels, 2003;LaRue, 2003).…”

Section: Dependent Variablementioning

confidence: 97%

On the same page: The value of paid and volunteer leaders sharing mental models in churches

Solansky

Duchon

Plowman

et al. 2008

Nonprofit Mgmnt & Ldrshp

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We examine the idea that mental models shared among paid and volunteer leaders are associated with improved financial performance in nonprofit organizations. Our empirical analysis of thirty‐seven churches yields evidence that organizations are more effective if paid and volunteer leaders have a shared task mental model—that is, if they report similar conceptualizations of organizational goals and decision‐making processes. These findings suggest that the extent of leaders' agreement on organizational goals and the processes of how decisions are made matter for organizational performance. We argue that it is as important to ensure that everyone is on the same page with regard to goals and how decisions are made as it is to have the “right” goals or right decision processes in place. Implications for practice and future research on shared mental models are discussed.

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Linking corporate strategy to capital structure: diversification strategy, type and source of financing

Cited by 148 publications

References 33 publications

Does Diversification Affect Capital Structure and Profitability in Pakistan?

Does Diversification Affect Capital Structure and Profitability in Pakistan?

The dividend and share repurchase policies of Canadian firms: empirical evidence based on an alternative research design

On the same page: The value of paid and volunteer leaders sharing mental models in churches

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