Random Impact Of Product Market Oligopoly Capital Structure Decision Research

There are two kinds of factors which affect the corporation capital structure: one kind comes from products market and the other comes from financial market. But little attention has been paid to the factors belong to products market in the classical theories of corporation finance, so many positive researches can't been explained convictivly. Fortunately, more and more documents which concentrate on the product market influence to capital structure emerged recent years, most of them took the oligopolies as objects.An oligoply's products decisions (either quantity or price) are based not only on the products environment (including market structure, demand, technological condition, etc.), but also on the limited liability effect and bankruptcy cost effect related to its debts level, so there must be some relation between the products market environment and the capital structure. By a duo-oligopolies two-staged Cournot model named L-B model in which limited liability effect and bankruptcy cost effect are integrated, given the coporation value maximized, the expression about corporation value Y and debt D can be written as:Based on the two expressions above, we argued that (1) changing the debts level (capital structure) will change the corporation value; (2) changing the product decisions will lead to the corporation value and the optimal debts level changes.The product market environment is affected by many inside and outside factors and keeps changing continuously. If the change is abrupt and obvious, it should be treated as random impulsion, which will change the product decisions and corporation value, even the optimal debts level.Mainly, there are three kinds of possible random impulsions in the real world: the change of demand; the change of technology; the change of firm's decision. All of them could change the product market environment obviously. By expanding the L-B model and integrating the impulsions into the model, we can conclude the different influeces to corporation value and debts level come from different impulsions:1 The change of demand——If the demand increases temperately, the corporation value also increases and the firm will increase its debts level, vice versa.2 The change of technology——New technology reduces products' cost and improves the corporation value, the firm will increase debts level. 3 The unsymmetrical change of the firm's decision——The leader's corporation value increases and will increase its debts level, the follower is contrary.The first two impulsions' influences to the product market environment and capital structure is one-off, once facing the impulsions, the oligopolies will adjust their product and capital decisions, then the equilibrium of product market will recover. When facing the third impulsion, the oligopolies can reach to a temporary equilibrium by adjusting their strategies, but the leader will have a strong desire to change its strtage and the long-term equilibrium will not be reached until one of the oligopolies retreat from the market.Verifying the L-B model and its expansions by the facts of Chinese flat panel disaplay industry, and by data simulation, we find the conclusions are sustained well.