Product-market Competition, Capital Structure And Corporate Performance

In the middle of 1980s, some financial economists, such as Brander and Lewis, Maksimovic, started to study on capital structure by industry instead of only confining to one single firm., and then the study of the interactive effects between product-market competition and capital structure have been developing. Product-market competition is one of the best ways to solve agent problem, which provide the information in the most economical way in order to reduce the extent information asymmetry between the owners and managers, and reduce the agency costs of the corporation, and promote a significant impact on company performance. It's necessary to figure out the affection on the corporate performance based on the effects on product-competition and capital structure, especially on the background of the relevant achievements abroad and combined with the special capital structure features in China. And it would be nice if this paper can supply some achievements and put forward some valuable suggestions on this field in China and adjust their capital structure to meet the more and more competitive market.Finally we get the conclusion that debt financing may be as a strategy tool to be used in produce-market competition by real empirical study on the financial data of listed corporation and the base of theoretical analysis, and the debt financing can bring competition advantage to the corporation. So managers should design capital structure rational in order to improve corporate performance ultimately according to different business-line characteristic and industry competition condition.