Research On The Interaction Between A Firm's Capital Structure And Product Market Behavior In The Framework Of Intra-industry

This paper mainly examines the intrinsic mechanisms that the product market behavior of upstream-downstream firms affects a firm's capital structure.In detail,utilizing existing research, this paper is forwarding from two dimensions.Firstly,using the function of debt that it can make a commitment and convey information about a firm,i analyze how a firm use debt to incentive its upstream-downstream firms to make relationship-specific investments,and hypothesize that a firm's capital structure is negatively related to the relationship-specific investments of its upstream-downstream firms.Secondly,how the bargaining power of a firm's upstream-downstream firms affects its capital structure is explored.Debt can prevent a firm's upstream-downstream firms with a strong bargaining power from predating on its surplus.Thus, a firm can decides its capital structure based on the bargaining power of its upstream-downstream firms.Further,the hypothesis that there is a positive relation between a firm's capital structure and the bargaining power of its upstream-downstream firms is brought.This paper makes an empirical test on theoretical hypothesis with both static and dynamic adjustment models from industry level.It is found that:(1) after controlling the factors as to product market competition degree that affect a firm's capital structure,a firm's leverage is negatively related to the R&D intensities of its upstream-downstream firms,however,the closeness of a firm's industry to its upstream-downstream industry does not affect the negative relation between a firm's leverage and the R&D intensities of its upstream-downstream firms;(2) a firm's leverage is negatively related to the number of firms in its upstream-downstream industry,and the more is the number of firms in its industry,the stronger is the negative relation; (3) the degree of the adjustment of a firm's debt ratio changes with the dynamic of the R&D intensities of its upstream-downstream firms,and there is a negative correlation between them; (4) a firm adjusts its capital structure according to the bargaining power dynamic of its upstream -downstream firms,and if the bargaining power of its upstream-downstream firms decreases more,the degree of a firm's capital structure deviant from the capital structure is less.