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The purpose of this paper is to empirically examine the impact of earnings management on capital structure across firm diversification strategies.

The study focuses on firms operating in the manufacturing sector (diversified and focused). Panel data methodology compares diversification strategies and identifies the impact of diversification strategy with earnings management practices on capital structure decision.

International and product diversified firms have lower levels of leverage than focused firms in their capital structure. Asset-based earnings management is positive for diversified (market/product) firms. Earnings management using discretionary expenditure (project based) is found to be higher for market diversified but product-focused firms. Earning smoothing method is found to be significant for focused firms and shows a negative relationship with capital structure.

This study offers an insight into the relationship between corporate diversification, earnings management and capital structure decisions of manufacturing firms. The results provide an important contribution to accounting and strategy literature. A distinction is made between market- and product-diversified firms and influence of earnings management practices (asset-based, project-based and earnings smoothing (ESM)) on capital structure decisions. Diversified firms (market/product) tend to have lower levels of leverage than focused firms and earnings management practices within firm groups significantly influence the capital structure decisions.

The present paper attempts to explain the impact of debt diversification and various debt financing sources on firm value. The paper also aims to address the long-run causality of various factors affecting firm value.

The study employs a dynamic panel data model for a sample of 233 listed firms from 2010 to 2019. Two-step generalized method of moments (GMM) is devised to study the impact of firm-specific factors on firm value.

The study establishes a negative impact of debt diversification on firm value. Further, the results also signal how the choice of debt instruments has a heterogeneous effect on firm value. Non-bank debt leads to a discount in firm value, while bank debt has no effect on firm value. The long-run determinants of firm value are debt ratio, tangibility and liquidity.

The findings of the study would aid the mangers in making informed decisions regarding the debt financing structure. Too much reliance on non-bank debt instruments leads to a negative impact on firm value. Therefore careful evaluation is necessary before accessing multiple debt sources.

Debt heterogeneity is globally established; however, its presence in the Indian context has not been validated extensively. The study not only validates the existence of debt diversification but also investigates how individual debt instruments affect firm value that is yet to be examined in the Indian context.

The governing role of bank-appointed directors (BADs) on the boards of non-financial firms has a potential to reduce information asymmetry between the firm and non-bank lenders. This should increase the confidence of other creditors in firm activities, thus performing the certification role. Therefore, the purpose of this paper is to empirically examine the certification role of BADs.

The authors test their hypotheses by using a panel of Indian non-financial firms. Our approach involves examining whether there is a significant difference in the number of different debt sources, the dispersion of debt among different debt sources, and leverage for BAD and Non_BAD Firms. The authors use univariate analysis and multivariate regression models to test the difference.

The authors find that firms with BADs on their board have (1) access to a higher number of different debt sources, (2) debt distributed evenly among different sources and (3) a higher debt ratio. Overall, our study provides supporting evidence for the certification role that BADs play on the boards of non-financial firms.

The authors contribute to the literature in two aspects. First, to the best of our knowledge, this is the only study that examines the effect of the governing role of banks on the lending decisions of non-bank lenders. Second, our study is associated with the growing body of the governance literature in the emerging markets context by examining the interaction of financial policies and governance in an institutional framework, which is very different from that of the developed world.

This paper aims to examine the relationship between the use of public debt and investment activity of European listed real estate companies.

Using a hand-collected sample of debt structures of 102 European public real estate companies, and using European Central Bank lending standards survey as a proxy for bank credit availability, the authors test a conditional hypothesis on the relationship between investment rates and the use of public debt during period of constrained bank lending environment in Europe.

The results show that ex ante diversification of debt allows retaining higher investment rates when the main source of debt, bank lending, is shrinking. The effect is statistically and economically significant and increases during times of tight bank lending constraints. The authors find no support to debt capacity explanation of the effect. They neither find support of the higher investment rates to be indicative of overinvestment problem. The results are robust to alternative model specifications and estimators.

The empirical analysis is limited to Europe.

Investments and the growth of real estate companies depend on their ability to seize value-increasing opportunities that arise in the competitive markets. This paper evaluates the role of a diversified debt structure in this context. The results suggest that debt structure can have material importance for the investment activity of European listed real estate companies and issuance of public debt can help companies to counterbalance the negative effects of restricted bank loan supply on the investment levels.

The paper extends the literature on debt structures of listed real estate firms by considering the effect of debt diversification on investments.

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

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.

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.

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.

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.

This paper aims to examine jointly the CEO inside debt and firm debt to further investigate the compensation incentives on risky decision-making and the resulting financial policy decisions concerning the debt structure of the firm.

Using S&P 1500 data from CRSP, Compustat, Execucomp and Capital IQ between 2006 and 2011, statistical analysis and regression models are used to determine potential correlations between the variable of interest, inside debt and debt control variables, including specialization.

Firms with high inside debt specialize in commercial loans and drawn credit lines. Larger firms diversify their debt holdings among commercial instruments and senior bonds. As firm size increases with inside debt, the effects are counteracted. Larger firms with high CEO inside debt have lower interest rates on these debt instruments and shorter maturities, suggesting a more conservative financing policy with regards to debt.

Debt diversification is partially affected by compensation in the form of inside debt. Future studies of debt diversification should include CEO compensation controls.

For struggling companies or for those that want to return to a conservative financial policy, they can influence the CEO to make this decision by deferring his compensation to retirement.

This paper considers debt policy through the lens of a key decision maker, the CEO, and uses compensation as an incentive to determine what choices are made concerning debt.

This paper aims to analyze whether a relationship exists between the debt structure concentration and investment–cash flow sensitivity of Brazilian companies.

The study is based on a sample of 500 Brazilian firms (337 unlisted and 163 listed) in the 10-year period from 2010 to 2019 analyzed according to the investment–cash flow sensitivity model.

The results show evidence that companies with more concentrated debt structures tend to have lower investment sensitivity to internal cash flow. In other words, firms with a greater concentration of debts tend to have less investment–cash flow sensitivity. In general, the results are robust to (1) variation of the debt concentration proxy and the independent variable; (2) the control of fixed effects in different dimensions and (3) use of estimator for endogeneity treatment, i.e. two-stage least squares (2SLS) and generalized method of moments (GMM).

Various studies have investigated whether specific financing sources reduce financial constraints, but few have addressed the relationship between debt concentration and these constraints. Besides this, to the best of the authors’ knowledge, no previous study has investigated the mentioned relationship in a sample of unlisted firms. This analysis is relevant since the effects of financial constraints tend to be stronger on companies that have restricted access to the capital market.

The development of human capital is critical for firms to gain competitive advantage. However, short‐term, risk‐averse managerial behaviour often produces lower investments in the development of human capital. Short‐term risk‐averse managerial behaviour is often the result of managerial energy absorption in mergers and acquisitions, higher debt levels, increasing diversification and size, inappropriate downsizing and lack of managerial vision. Such problems can be reversed through downscoping, retaining valuable employees during restructuring, emphasizing the importance of human capital, cultivating an effective learning‐oriented corporate culture, developing an entrepreneurial spirit, promoting a long‐term focus, and promoting high‐quality products and services. With these changes, a strategically targeted human resource development programme can be established.

The purpose of this paper is to investigate whether, and to what extent, corporate diversification into related and unrelated businesses affects capital structure choices, and whether ownership structure is germane to the understanding of corporate diversification strategies and debt‐equity financing choices.

Univariate approaches include the parametric two‐sample t‐test, non‐parametric Kolmogorov‐Smirnov test and Kruskal‐Wallis rank test, and cluster analysis. Multivariate approaches include panel data regressions to identify the sign and magnitude of the effect of diversification on capital structure, after controlling for a number of industry and firm characteristics as suggested in the literature.

Corporate diversification into related or unrelated industries has opposite effects on capital structure, after controlling for ownership structure and corporate governance mechanisms. Consistent with the prediction of organizational economics, an increase in the degree of business relatedness is associated with a reduction in debt while an increase in business unrelatedness is associated with an increase in debt. In addition, there is strong evidence that government‐controlled firms use less debt financing and that government ownership weakens the positive relationship between unrelated diversification and leverage. The results are robust to different measures of capital structure.

Traditional finance literature has not been able to provide conclusive evidence on what affects corporate capital structure decisions. This paper shows that a corporate strategy perspective, with its emphasis on a managerial decision‐making process, can provide a behavioral basis for understanding capital structure choices.

Enterprise diversification is a self‐insuring strategy used by farmers to protect against risk. This study examines the impact of various farm, operator, and household characteristics on the level of onfarm enterprise diversification. Evidence exists that larger farms are more specialized. Also, farmers who participate in off‐farm work, farms located near urban areas, or farms with higher debt‐to‐asset ratios are less likely to be diversified. In contrast, evidence suggests there is a significant positive relationship between diversification and whether the farm business has crop insurance, is organized as a sole proprietorship, or receives any direct payments from current farm commodity programs.