The Study On The Relationship Between Debt Financing And Product Market Competition

As being the overlap of industrial organization and corporation finance, the relationship between capital structure and product market competition is drawing the more attentions of researchers around the world. These deep investigations are very important for people to clarify the difference of corporation financing behaviors due to the different competitive structures and strategies, to clearly know the internal mechanism of corporation competitive strategies, and to control the corporation financial risk.The paper investigates the theoretical influence of debt financing on product market competition. And we empirically research the relationship of both sides. The detailed consists of four sections:First, based on stationary results of short-run debt and uncertainty, we extend our researches to long-run debt by establishing two-staged stationary game-model. One can further analyze the influences of long-run debt on product competitions involving quantity, price and competition strenght for demand and cost uncertainty, especially influences of residual debt on later period, and total debt on beginning equilibrium quatity and price.Next, we build up dynamic game-model to theoretically investigate effects of debt financing on product competition. Meantime we design the substitution coefficient to find out the influence of substitution on dynamic price.Then, the simultaneous equations are used to analyze the empirical influence of debt financing on product quantity and price for stationary and dynamic conditions through using the samples of steel corporations in Chinese A-share. And the data from manufacturing corporations in Chinese A-share are utilized to study the influence of debt financing on competition strength through panel data model. The empirical results verify the theoretical conclusions drew from the previous game-models.Finally, based on analysis of steel industry, we use the data of manufacturing industry to study the influence of product market competition on debt fiancing. We compare the influence of the current competition on debt financing with the lagged term. And the influence of product market competition on debt financing at different market conditions is investigated through vector auto-regression method. The originalities of this dissertation are reflected in the following aspects: (1) We systematically analyze the theoretical influence of debt financing on product market competition for different uncertainties, debt terms and competition types through stationary and dynamic game-model. (2) Based on the previous compensation ability, the behavior properties of corporation refinancing is established by designing random variable to analyze the effects of debt contract change on product market competition. (3) We design the substitution coefficient to investigate its influence on price competition. (4) The simultaneous equations are established to empirically analyze the influences of debt financing on product quantity and price under stationary and dynamic status. And the panel data model is used to analyze the relationship between debt financing and different competitive strengths. And the further influence of product competition on corporation debt financing at different market conditions is investigated.The researches of paper make some contributions to the relationship between debt financing and product market competition. And the paper also explores the research scopes to some extend relative to traditional capital structure, corporation strategy and competition tactics. The paper supply corporations at new business model with some valuable results of theory and empirical evidence to help setting down the appropriate strategies of investment, financing and competition.