TY - JOUR
T1 - More-money and less-cash effects of diversification
T2 - Evidence from Japanese firms
AU - Ushijima, Tatsuo
N1 - Funding Information:
I am grateful for the helpful comments from Shin-ichi Fukuda (editor), two anonymous referees, and seminar participants at the Financial Management Association, Western Economic Association International, Research Institute of Economy, Trade and Industry (RIETI), Aoyama Gakuin University, and Keio University. All of the remaining errors are mine. This study was financially supported by the Japan Society for the Promotion of Science KAKENHI (Grants-in-Aid for Scientific Research) Grant Number 15K03617.
Funding Information:
I am grateful for the helpful comments from Shin-ichi Fukuda (editor), two anonymous referees, and seminar participants at the Financial Management Association, Western Economic Association International, Research Institute of Economy, Trade and Industry (RIETI), Aoyama Gakuin University, and Keio University. All of the remaining errors are mine. This study was financially supported by the Japan Society for the Promotion of Science KAKENHI (Grants-in-Aid for Scientific Research) Grant Number 15K03617 .
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/12
Y1 - 2020/12
N2 - This study provides evidence for the more-money and less-cash effects of diversification based on the industry-adjusted debt and cash holdings of Japanese firms. Diversified firms are more leveraged while holding less cash than focused firms in the same industries, even after controlling for the standard determinants of capital structure, unobserved heterogeneity, and the endogeneity of firm scope. The study also finds that these effects are mitigated when a firm has an ownership structure that insulates managers from capital market pressures for risk-taking. This pattern suggests that the risk-taking incentives of managers differentiate the effect of diversification on finance across firms.
AB - This study provides evidence for the more-money and less-cash effects of diversification based on the industry-adjusted debt and cash holdings of Japanese firms. Diversified firms are more leveraged while holding less cash than focused firms in the same industries, even after controlling for the standard determinants of capital structure, unobserved heterogeneity, and the endogeneity of firm scope. The study also finds that these effects are mitigated when a firm has an ownership structure that insulates managers from capital market pressures for risk-taking. This pattern suggests that the risk-taking incentives of managers differentiate the effect of diversification on finance across firms.
KW - Cash holdings
KW - Corporate diversification
KW - Japan
KW - Leverage
KW - Risk-taking
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U2 - 10.1016/j.japwor.2020.101040
DO - 10.1016/j.japwor.2020.101040
M3 - Article
AN - SCOPUS:85096828586
VL - 56
JO - Japan and the World Economy
JF - Japan and the World Economy
SN - 0922-1425
M1 - 101040
ER -