Product Diversification Strategy and the Decision on Financing Structure: The Theoretical Model and Its Empirical Study

Abstract

Abstract:

Based on the agency theory and under the premise of taking the interests of the customers into account, product diversification strategy and the theoretical model of financing structure are constructed. According to the Panel data released by the GEM in 2009-2012 China, by WLS, the influence on the decision-making of financing structure by the diversification strategy of GEM is tested in a real way. Theoretical models show that the optimal financing structure is a balanced result of product diversification strategy and the cost of agency. Empirical results show that diversity of GEM has a significant negative correlation with the financial leverage, which gives strong support to the theory that analysis should be given to the relationship between product diversification and the financing structure based on the agency theory.

Key words: product diversification strategy, financing structure, theoretical model, empirical study

Liang Yasong, Zhong Tianli, Hu Yanbin. Product Diversification Strategy and the Decision on Financing Structure: The Theoretical Model and Its Empirical Study[J]. , 2016, 28(4): 178-185.

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Product Diversification Strategy and the Decision on Financing Structure: The Theoretical Model and Its Empirical Study

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