Does debt diversification impact the value of companies? Evidence from Brazil

Purpose: The main objective of this work is to investigate the impact of debt diversification on the market value of Brazilian listed companies in the period 2010-2021. Design/methodology/approach: We used a sample of 206 Brazilian listed companies from 2010 to 2021. Panel data regression models were estimated, with the dependent variable represented by the market value of firms through three different proxies and the explanatory variables through three different heterogeneity indices, in addition to control variables. Originality: The use of different forms of debt is a phenomenon present in the reality of firms. However, how this characteristic of the debt structure affects the value of companies is a topic that still needs to be investigated in depth in emerging markets, considering the specificities of these markets. In Brazil, the credit market is characterized by high banking concentration and the significant presence of development banks, in addition to an institutional environment with lower creditor protection and lower levels of corporate governance, creating a distinct environment from previous research. Findings: It was observed that the greater the heterogeneity of firms’ debt, the higher the market value of companies, pointing to the importance of debt diversification in mitigating agency costs and increasing firms’ efficiency. The results highlight the importance of considering the characteristics of the local market in the effectiveness of creditor monitoring. Practical implications: This result contributes to the decision-making process of shareholders and managers in the Brazilian market, by showing which factors can maximize investments made and, consequently, increase the value of companies.