More-money and less-cash effects of diversification: Evidence from Japanese firms

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2 Citations (Scopus)


This study provides evidence for the more-money and less-cash effects of diversification based on the industry-adjusted debt and cash holdings of Japanese firms. Diversified firms are more leveraged while holding less cash than focused firms in the same industries, even after controlling for the standard determinants of capital structure, unobserved heterogeneity, and the endogeneity of firm scope. The study also finds that these effects are mitigated when a firm has an ownership structure that insulates managers from capital market pressures for risk-taking. This pattern suggests that the risk-taking incentives of managers differentiate the effect of diversification on finance across firms.

Original languageEnglish
Article number101040
JournalJapan and The World Economy
Publication statusPublished - 2020 Dec


  • Cash holdings
  • Corporate diversification
  • Japan
  • Leverage
  • Risk-taking

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


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