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Attitude of bank credit managers and analysts towards firm diversification in Mozambique

Ibeawuchi Ibekwe (Sonex, Maputo, Mozambique)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 7 August 2017

Abstract

Purpose

The purpose of this paper is to survey bank credit managers and analysts in Mozambique regarding their attitude toward firm diversification.

Design/methodology/approach

Forty-five credit managers and analysts from 23 banks in Mozambique were surveyed about their views on diversification and diversified firms. Questionnaires were used. Data were analyzed using chi-square test and binomial test.

Findings

Credit analysts and managers in Mozambique have a generally positive attitude toward diversification. This is mainly due to the coinsurance effects and stability of cash flows that diversification could provide. They, however, prefer moderately diversified to highly diversified firms and related to unrelated diversified firms. This is a puzzle, given the expectation that greater unrelated diversification is better able to provide coinsurance.

Practical implications

The study provides information that is useful for understanding the diversification–cost of capital relationship and could help corporate managers in making capital structure decisions.

Originality/value

Previous researchers have not studied the attitude of credit managers/analysts toward diversification in Mozambique using the survey approach. The study contributes to the literature on diversification and access to external finance, the diversification discount and cash holding behavior of firms.

Keywords

Citation

Ibekwe, I. (2017), "Attitude of bank credit managers and analysts towards firm diversification in Mozambique", Qualitative Research in Financial Markets, Vol. 9 No. 3, pp. 182-204. https://doi.org/10.1108/QRFM-08-2016-0023

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited