| Summary: | This study examined the effect of financial constraint on investment of manufacturing firms either directly or moderated by level of diversification. The research population are manufacturing companieslisted in Indonesia Stock Exchange with their financial report during 2004-2008.
Using a panel data of 527 samples. The result shows that there is negative significant influence of financial diversification on investment firm (P -0,121 ) and diversification- as a moderating variable decreases negative effect of financial constraint on investment firm (P 0,141). Furthermore, used split samples, DFC*Divers in contracting industries seems to have greater impact on investment (fJ0,195) than DFC*Divers in growing industries (fJ 0,153), means the existence of benefits of internal capital markets for companies in contracting industries.
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