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Capital Structure of Diversified Companies on emerging markets

Student: Tagunova Ksenia

Supervisor: Maria S. Kokoreva

Faculty: Faculty of Economic Sciences

Educational Programme: Corporate Finance (Master)

Final Grade: 8

Year of Graduation: 2017

While a large number of studies on this subject have been conducted in developed markets with a focus on studying the capital structure of diversified companies by geography and by product, much less research is devoted to the study of companies with related and unrelated diversification in emerging markets. This paper is devoted to the study of the influence of diversified companies under the two classifications on the capital structure of companies in emerging markets. To determine the type of geographical and product diversification, the number of geographic and business segments was used, and in order to identify related and unrelated diversification, the first 2 digits of the SIC code were matched for all industries in which the company operates. To determine the relationship between the influence of each type of diversification on the capital structure, regression was used, where the ratio of total, long-term and short-term debt to the sum of total assets was considered as a dependent variable. The results of the study confirmed the positive relationship between the capital structure and product diversification and the negative relationship with geographic diversification in combination with the product and separately. As a result, it was revealed that related diversification is characterized by a greater degree of financing at the expense of equity, while companies with unrelated diversification are financed mainly by debt.

Full text (added May 16, 2017)

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