The Study Of The Impact Of Product Market Competition On The Company’s Capital Structure

Since capital structure and industrial economic incorporated into the study ofresearchers, the research of capital structure and product market competition has got arapid progress and domestic research in recent years has also received development.But there are not many empirical literatures, and the theoretical and empiricalanalysis in this area is far from mature. The relations between capital structure andproduct market competition still has no convincing conclusion.Thus, this paper studies listed companies’ relation of capital structure andproduct market competition with both theoretical and empirical methods. In the firstchapter, we introduce the background and significance of this paper. Focusing on thecontribution of each representative study, Chapter2summarizes the history of capitalstructure and product market competition study. Chapter3presents a generalstatistical analysis of listed companies’ capital structure and investigates its structurecharacteristics and trend, paving way for theoretical and empirical analysis of the nextchapter; then chapter4provides mathematical proof for the relation between capitalstructure and product market competition with two-period sequential game model andempirical analysis on China’s listed companies.We select ten industries according to CSRC standard. Based on the publishedfinancial data of China A in2002-2012, we study the effects of product marketcompetition on companies’ debt level, debt term structure and its source withfixed-effect model. Through theoretical and empirical analysis above, we get thefollowing conclusions:a. Product market competition has a significant negative impact on companies’debt level;b. Product market competition has a significant negative impact on companies’long-term debt level and positive impact on short-term debt level;c. Product market competition has a significant positive effect on companies’commercial credit level and negative impact on bank’s loan level. Market competition strength is a key factor need to consider carefully when thecompany develops its financial strategy. A reasonable debt level can reduce risk,improve the market value and competitiveness of companies. This paper enriches thestudy of capital structure and product market competition, but also provides atheoretical and empirical suggestions for optimizing capital structure for China’slisted companies.