International diversification, agency cost and capital structure: Empirical evidence from Chinese listing corporations.

Corporate strategy has a significant impact on capital structure. In the strategic behavior of enterprises in China, international diversification has become more and more important. Theory suggests that because the economic behavior between countries is not completely related to each other, international diversification is helpful to raise the enterprise's debt ratio. Based on 2009-2011 balanced panel data of Chinese listing corporations, the research on the relationship between international diversification strategy and capital structure shows, international diversification significantly reduced the enterprise financial leverage, contrast to industry diversification; and the reason mainly lies in that transnational management increases agency cost of debt, so international diversification reduced the company's debt ratio. At the same time, the relationship between the level of international diversification and corporate debt ratio is significantly positive for multinational corporations. [ABSTRACT FROM AUTHOR]