The Effect of Financial Drivers on Product and Geographic Diversification for Listed and Unlisted Firms

This paper investigates whether free cash flow arguments or internal capital market perspective explain product and geographic diversification decisions. Using a unique panel of hand-collected data from Italian firms (listed and unlisted) for the period 1980-2010, the results reveal, as a net effect, the predominant role of the internal capital market arguments, especially relevant for the decision to diversify unrelated and for unlisted firms.