This study aims to determine whether corporate diversification increases the borrowing capacity of Brazilian companies by means of cross-pledging. Using a panel data model, we estimated the relationship between leverage and the degree of corporate diversification using a sample of companies listed on the São Paulo Stock Exchange (Bovespa) between 2009 and 2011 and Brazilian companies with access to international markets through American Depositary Receipts (ADRs) in the period 2003-2011. Using empirical tests, we found no relationship between diversification and debt in either sample, indicating that a strategy of corporate diversification should not be used as a strategy to expand a company's financing capacity.
Cross-pledging; Corporate diversification; Capital structure
