Research On The Impact Of Corporate Finance Capabilities To The Product Market Competition

In the past three decades, the industry economists and financial experts have begun to open their respective visions of each research area to take mutual fields for consideration. Since James A. Brander and Tracy Lewis studied the interaction between corporate debt financing and product market competition in1986which is the pioneering research in this field, the domestic and foreign scholars on the study of the relationship between financing decisions and product market competition behavior have made some achievements. They summed up some new regularities contributing to explain the phenomenon that can’t be explained in their prior respective fields of study. With the living environment and development environment increasingly perplexing, business-men pay more and more attention to the industrial financing and product market competition issues, especially when they draw up the long-term strategic planning the impact of the interaction between the two will be seriously considered. Financing capacity and market competitiveness of products are the two key factors in the enterprise strategic competition, so carrying out this research has theoretical and practical significance. With the breaking out of the financial crisis in2008which gradually spread to the real economy, China’s Bureau of Statistics, Mr. Ma once said that the year of2009is the most difficult year for China’s economic development since the beginning of the new century. It is under this macroeconomic background that the paper summarize the outcomes of previous studies and analyze the interrelated theoretical basis. After that we collect the data of the post-crisis era of China’s manufacturing industry listed companies’financing capacity and the product market competition, to research the relationship between the corporate finance capabilities and product market competition. Through the study of the manufacturing sector which the cornerstone of the national economy, we should discovery some new rules to put into practice.Searching in the empirical analysis of data on1078manufacturing listed companies from2008to2011, it indicates that there is a significant negative correlation between corporate finance capacity and market competitiveness, but the degree is a little. This may be due to the special era of post-financial crisis economic background when the enterprises face with the sharp drop in demand both at home and abroad leading to great mount of excess capacity. During this period companies are cautious in the decision-making, and take great effort to explore the future direction of development of enterprises. In addition, the article also studied the dynamic effects of corporate finance capabilities to product market competition. With the regression analysis on corporate finance capabilities of2009and2010to the product market competition of the year2011, the study finds that the impact of corporate finance capacity the year of2009to the product market competition the year of2011is not significant. However, the corporate finance capacity the year of2010has a significant positive impact to the product market competition the year of2011. This may because entrepreneurs are optimistic about the future, corporate finance capacity does play a role to help businesses gain a competitive advantage in the product market competition. Finally, the paper summarizes the research conclusions and puts forward policy recommendations in order to provide a reference for the enterprise making operating decisions and strategy development in the future.