A Study On The Relationship Between Product Characteristic And Capital Structure In The View Of Implicit Contract

There is a phenomenon of high-debt financing among the listed companies with keen competition, in spite that at the same time the overall listed companies in China have share equity financing preference and have low-debt rate capital structure as a result. Domestic scholars have conducted lots of theoretical and empirical studies for that, but there are still many issues of concern lost, one of them is: Why the capital structure is different between the durable goods sectors such as household appliances, automobiles, and computers, and the nondurable goods sectors such as food, beverage, textile and clothing, though they all face the fierce products market competition? Why does the phenomenon of high-debt financing often exist in the durable goods industry? Will the product characteristics have an influence on the capital structure of listed enterprises? This paper just studies the function mechanism how the product characteristics have impact on the corporation's capital structure on the basis of this visual angle. It has explained the phenomenon of high liability financing among listed companies in durable goods sectors, and to certain extent it also offers some theoretical foundation, which is helpful for the durable goods sectors how to effectively make use of capital market to realize their own development.In the theoretical research part, firstly it is found that the implicit contracts between firms and customers are the micro-foundation for the function mechanism how product characteristics effect corporation's capital structure, through introducing the analysis paradigm of transaction cost economics. Then we establish a dynamic game model on specific investment between the firm and customer, and analyze why the manufacturers for durable goods have more incentives to carry on investment of assets specificity. At last we propose the research hypothesis that the capital structure of firms for durable goods has a positive correlation with assets specificity investment under the condition of direct financing restriction.In the positive research part, an econometric model between capital structure and asset specificity investment is built on the basis of former theoretical analysis. Then we utilize panel data of listed companies from 2002 to 2006 from CSMAR database to examine the research hypothesis. Further we design two sample groups, one including 172 listed companies manufacturing durable goods, the other including 85 listed companies manufacturing nondurable goods as a reference group. The empirical results show that capital structure has a positive correlation with assets specificity investment only in one group, but in the reference group there doesn't exist such correlation, which therefore supports the research hypothesis.