Relationship between Business Strategy and Capital Structure
DOI:
https://doi.org/10.17524/repec.v18i1.3258Keywords:
Estratégia prospectora, Estratégia defensora, Estrutura de capitalAbstract
Objective: This paper analyzes the relationship between business strategy and capital structure.
Methods:Archival research was conducted with 488 observations of companies listed in Brasil, Bolsa, Balcão [B]3. As proxies of interest, the classification of companies into prospectors and defenders was adopted for business strategy, and the relationship between third-party and equity capital was used for capital structure. The econometric model was performed using ordinary least squares linear multiple regression, controlling for year and sector fixed effects.
Results: The results reveal that business strategy relates to how a company finances its capital. Prospectors tend to depend more heavily on third-party capital, present more significant risks, and lower cash flow profitability than defender companies. In contrast, because defenders seek market dominance and make more conservative decisions, they generate funds internally to finance their activities.
Contributions: These findings show that the aggressive behavior of companies toward capital financing may be linked to the choice of an expansion strategy, indicating that management decisions influence this financial information.
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