Abstract:This study investigates how firms' debt cost affects their conservatism in the first stage, and then leads their future strategies in the second stage. Moreover, it shows that firms would likely ignore their conservatism when choosing a strategy, especially diversification. Then, it presents two interrelated novelties. First, firms operate with a low cost of debt, constructing their high conservatism.As a result, they would likely choose a cost-reduction strategy. Conversely, firms with low conservatism usuall… Show more
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