| Summary: | This research aimed to analyze the impact of the implementation of
diversification strategy policy to capital structure and profitability of the firms
listed in Indonesia Stock Exchange. Firm�s diversification strategy policy is
measured by using diversification index measured using Hierschman-Herfindahl
Index. Diversification strategy based on the implementation, relatedness, and
geographic, is measured using dummy variable. Capital structure measured using
capitalization ratio, while profitability measured by market performance and
accounting performance of the firm. Sample was taken using purposive sampling
method. Based on the criteria used, 138 firms were used as sample during five
years observation period (2007-2011). The estimation done by using Pooled Least
Square method.
The result of this research shows that there is no significant effect caused
by diversification strategy to firm�s capital structure and profitability. However,
geographic diversification done by diversified firms has negative effect to market
performance and positive effect to accounting performance.
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