Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?
Dublin Core
Title
Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?
Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?
Subject
Corporate Governance; Diversification strategy; Leverage
Description
This paper aims to analyze whether firm diversification affects firm leverage in developing
countries. This research model is based on the agency theory view that focuses on diversification in leverage through good governance mechanisms. The data comes from 43 companies from 215 observation companies listed on the Indonesia Stock Exchange in the 2014–2018 period, supporting the co-insurance hypothesis; our findings suggest a positive effect of diversification on debt levels. Our findings show that cost advantages occur in diversified firms, including higher debt ratios in the firm’s capital structure. These effects are more substantial when firms have better corporate governance. These findings add
value to the existing literature on the relationship between firm diversification, corporate management, and leverage and can be helpful for managers and policy-makers regarding the evaluation of diversification strategy and corporate governance implementations in Indonesia that has been widely studied.
countries. This research model is based on the agency theory view that focuses on diversification in leverage through good governance mechanisms. The data comes from 43 companies from 215 observation companies listed on the Indonesia Stock Exchange in the 2014–2018 period, supporting the co-insurance hypothesis; our findings suggest a positive effect of diversification on debt levels. Our findings show that cost advantages occur in diversified firms, including higher debt ratios in the firm’s capital structure. These effects are more substantial when firms have better corporate governance. These findings add
value to the existing literature on the relationship between firm diversification, corporate management, and leverage and can be helpful for managers and policy-makers regarding the evaluation of diversification strategy and corporate governance implementations in Indonesia that has been widely studied.
Creator
Katiya Nahda, Azaria Lionara Rahmadana
Source
DOI: 10.26905/jkdp.v25i3.5758
Publisher
Universitas Merdeka Malang
Date
July 2021
Contributor
Sri Wahyuni
Rights
ISSN: 2443-2687 (Online) ISSN: 1410-8089 (Print)
Format
PDF
Language
English
Type
Text
Coverage
Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Files
Collection
Citation
Katiya Nahda, Azaria Lionara Rahmadana, “Jurnal Keuangan dan Perbankan Universitas Merdeka Malang
Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?,” Repository Horizon University Indonesia, accessed November 21, 2024, https://repository.horizon.ac.id/items/show/4796.
Diversification Strategy and Good Governance: Does It Affect Firm’s Leverage?,” Repository Horizon University Indonesia, accessed November 21, 2024, https://repository.horizon.ac.id/items/show/4796.