This study analyzed the effects of the interrelationship between corporate diversification and capital structure on firm value for 236 listed companies in Korea, using Two-Stage Least Squares (2SLS). The results from the full sample analysis indicate the following. First, since Korean firms simultaneously and interdependently determine their diversification strategies and capital structure policies, it is desirable for the government to implement diversification restraint policies aimed at improving corporate financial structures in conjunction with financial structure policies aimed at restraining diversification when establishing policies on diversification and capital structure. Second, Korean firms pursue diversification through debt financing, and larger firms tend to have higher levels of diversification. Third, diversification and firm size were found to have positive (+) effects on the debt ratio, while institutional investor ownership was found to have a negative (−) effect. Fourth, the level of diversification was found to have a negative (−) effect on firm value, while the debt ratio was found to have a positive (+) effect. When the sample firms were divided into those belonging to the top 30 business groups and those not belonging to the top 30 business groups, the results showed that for firms belonging to the top 30 business groups, diversification and capital structure decisions were made independently, whereas for firms not belonging to the top 30 business groups, diversification and capital structure decisions were made interdependently. Therefore, regarding government policy directions on corporate diversification and capital structure, it was found desirable to establish and implement diversification and capital structure policies independently for firms belonging to the top 30 business groups, and to establish diversification and capital structure policies in a linked manner for firms not belonging to the top 30 business groups.