Firm complexity and capital structure: Evidence from Italian diversified firms

This paper examines the links between product diversification, international diversification and capital structure for a panel of medium and large Italian firms. The results indicate that the interaction between these two dimensions of diversification strategy has a negative and significant impact on leverage. Furthermore, debt maturity analysis reveals that firms pursuing a simultaneous dual diversification strategy have, in particular, lower long-term debt ratios. Our findings support the hypothesis that the complexity that comes from diversification reduces debt levels.