Capital Structure, Product Market Competition, Incentives, And Managers

By introducing the current theory of the interaction between capital structure and product market competition overseas and China's specific institutional characteristics and the influence of managerial motivation and restriction on enterprise behaviors, this dissertation analyzes the global characteristics of strategic decision and financing behavior of China's enterprise management in different situations of product market competition and capital market financing during different periods of transition economy. For example, in the initial stage of China's reform and opening, the optimal decision of different enterprises was gaining market share and high return by taking the strategy of "indebted limited liability effect" of high debt and over-expansion under the circumstance of high demand of product market and soft bound of budget of credit market. After 1989, the increase of demand slowed down and facing the complexion of low degree of industrial concentration of product market and financial strain of medium and small-sized enterprises caused by the circulating trap of "credit squeeze---bad loan", the advantageous enterprises ''wallow in money", specifically, those listed companies that could finance from the stock market, began to take predatory pricing strategy in succession and tried to enlarge market share and obtain high return by squeezing medium and small-sized enterprises out of the market After 1998, the vicious circle of deflation and "credit grudging" of banks in product and credit markets, overcapacity, the difficulty of retreating of loss-incurring enterprises in some industries from the market for institutional reasons and over-competition in some industries, led to the incessant decrease of enterprises' global income, persistent increase of rate of debts and constant rise of ratio of bad assets of banks, which further intensified the vicious circle of deflation and "credit grudging" of banks. Meantime, because of the soft bound of equity capital caused by the low cost of stock right financing and the deficiency of corporate governance structure, listed companies were confronted with the problems of over-financing of stock right, over-investment and over-competition.This dissertation further tries to explain the influence of these behaviors on economic growth, market structure and enterprise performance, and to answer the questions put forward in the introduction of this dissertation, which are:(1) Why compared with non-state-owned enterprises, state-owned enterprises, which should be theoretically low efficient, had a high rate of profits and taxes tocapital though their rate of profits and taxes to capital had a decreasing tendency all along before 1989? And why with a high rate of profits and taxes to capital, the market share of state-owned industrial enterprises in the whole industry constantly decreased?(2) Why rural enterprises without a perspicuous relation between ownership and management expanded fast and private enterprises with an advantageous mechanism developed slowly in the non-state-owned industries during the rapid economic growth in 1980s?(3) Why state-owned enterprises with a good performance previously were in an aggravating financial condition in 1990s?(4) What is the reason of high debts of enterprises?(5) What is the reason behind the phenomena of over-competition in many industries of China in recent years?(6) How to handle the problems of over-financing of stock right and over-investment of China's listed companies in recent years?In the conclusion, I point out the direction of further development of this dissertation.