The Relationship between Diversification Strategies and Capital Structure of Non-Financial Firms Listed At the NSE

Citation:
Nzioka S, Elly D. "The Relationship between Diversification Strategies and Capital Structure of Non-Financial Firms Listed At the NSE." African development finance journal. 2017;1(2):32-61.

Abstract:

Purpose-This study was carried out with an aim to analyze the effect of
diversification strategies on capital structure of non-financial firms listed at NSE. The
study focused specifically on analyzing the effect of product (related and unrelated)
and geographical diversification on capital structure.
Methodology-An exploratory study design was used to collect data, with the
population of the study being 64 firms listed in NSE. Out of the 64 firms, 41 non-
financial firms were selected as the sample of the study. Data was collected from
secondary sources, NSE and capital market authority. Data collected was analyzed
through STATA by the use of panel data regression analysis.
Findings- Related product diversification had a coefficient of 21.5(p-value=0.007)
indicating that it has a significant relationship with capital structure. The study results
show that debt is the most preferred form of financing in related product
diversification strategies. Unrelated product diversification had a coefficient of 22.7(p
value =0.006) indicating that it has a significant relationship with capital structure.The
findings of this study show that debt is the most preferred form of financing in
unrelated product diversification strategies. Geographical diversification had a
coefficient of 0.178 (p-value=0.799) indicating that it doesn’t have a significant
relationship with capital structure.Geographical diversification boosts the worth of
shareholders by taking advantage of specific assets and by accelerating functioning

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