A note on corporate strategy and capital structure

Article Abstract:

Earlier studies conducted by Lowe, Naughton and Taylor (1994) and Barton and Gordon (1988) on the relationships between capital structure and corporate strategy are reviewed. These two separate works, the former using American data and the latter using Australian data, had dissimilar functional relationships because they used different definitions of capital structure. To reconcile the findings of these studies, a model combining the US specification with the Australian data is estimated. The results show a less than robust relationship between strategy and capital structure. Support is also found for the conclusion of Lowe et al. and Barton and Gordon that firm-level factors have a stronger impact on the debt equity ratios of highly diversified companies. Other findings are discussed.

Diversification in industry, Industrial diversification, Efficient market theory, Capital

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Top management team agreement about the strategic decision process: a test of some of its determinants and consequences

Article Abstract:

Data from 65 firms belonging to the forest products industry and paints and coating industry have been analyzed to find out the determinants and consequences of top management team (TMT) agreement that affect the comprehensiveness of the strategic decision process. Several factors that may shape TMT agreements have been considered, including the stability of a firm's industry/ environment, its past performance, organizational size, TMT size and TMT tenure. Results indicate that firms in an industry with an unstable environment demonstrate significantly more agreement than firms enjoying a stable business environment. It was also noted that organizational size is negatively related to TMT while past performance has no influence on TMT.

Practice, Executives

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