The Relationshipshipship Between Financial Leverage And Firms Performance:based On Research On Moderation Of Competitive Intensity And Competitive Strategy

Debt financing of listed companies are extremely important components in theirs financing channel. Because of the rate of debt financing is closely linked with firm performance, therefore definitude the relationshipshipship between financial leverage and performance as well as other variable influence on both relationshipshipship are becoming vital important so that providing policy advice for managers making theirs financing decision and operating decision.Previous studies that tried to solve the leverage-performance puzzle continue to report mixed and often contradictory findings.Some researchers argue that the conflicting evidence reported by prior studies may be due in part to the approaches used. Most prior studies have examined only the direct effects of financial leverage on performance. However, O'Brien (2003) argues that the effect of financial leverage on performance may be contingent upon competitive intensity and the strategy pursued by the firm and researchers note the need for studies that examine the influence of these variables.Based on this perspective, on the basis of literature review related to this article both at home and abroad, the use of empirical research methods, the use of empirical data on the impact of China's listed companies to complete the effects of competitive intensity and competitive strategy on the relationshipshipship between financial leverage and the performance of firms.In this paper, use Shanghai and Shenzhen A-share market the two cities listed companies as study object, select the relevant data for 2006-2008, the composition of panel data, using SPSS and EVIEWS to empirical analysis the effects of competitive intensity and competitive strategy on the relationshipshipship between financial leverage and the performance of firms. The paper overcome the defect to reashering only the direct effects of financial leverage on performance but not for considering other factors.This study empirically investigates the effects of competitive intensity and competitive strategy on the relationshipshipship between financial leverage and the performance of firms. This study confirms the hypothesis that the cost of debt is higher for product differentiation firms than cost leadership firms. Furthermore, the results indicate that competitive intensity has a negative effect on the leverage-performance relationshipshipship, the benefit of leverage will decrease as the level of competitive intensity increases.suggesting that competition acts as a substitute for debt in limiting manager's opportunistic behavior. These findings reinforce the need to consider moderating factors such as strategic choice and the environment in which a firm operates when investigating the effects of leverage on performance.