DOES DIVERSIFICATION STRATEGY EXPLAIN SELECTION OF FINANCING CHOICE

Abstract

Diversification strategy has been researched extensively in the fields of strategic management and finance. Nevertheless, there is still inadequate empirical research related to the role of diversification strategy on selection of financing choice. Moreover, there is inconclusive evidence among literature in this particular field. This study examines the effect of diversification on choice of financing among Malaysian public listed firms using Pearson Correlation for a sample of 76 firms during the period of 1994-2007. The evidence suggests that diversification strategy positively influences choice of financing. This possibly indicates that implementation of diversification strategy has an impact on how firms select its financing decision. Nevertheless, this evidence should be further examined using robust methodology to substantiate this outcome.