Study On The Effects Of Capital Structure Decision-Making On Product Market Competitiveness

The capital structure of enterprises in the financial management is an old yet young subject. Without capital, businesses like water and trees without source can not survive. Enhancing the competitiveness of enterprises so that enterprises can survive in the increasingly complex and changing competitive environment is the dream of all entrepreneurs. Since the 1980s, industry economics and capital structure theory gradually integrate, as a result developing financial strategy theory and achieving fruitful research results. The research and development of this field show that corporate capital structure decision-making is the suitable choice of some factors, such as enterprises based on market competitive environment, business strategy, as well as capital market environment. Meanwhile, the current capital structure decision-making will have a significant impact on the follow-up market competitiveness of enterprises in the product market. At present, China is in a period of economic restructuring, the capital market continuously open, and the product market and the capital market become more and more complicated. Studying on how China's companies combine capital structure and product market competition, win competitive advantages, enhance corporate value, achieve good performance, and promote the healthy development of companies has very important theoretical and practical significance.By summarizing the previous achievements and viewpoints, this dissertation found out that there exist two opposite theoretical viewpoints when studying on the influence of enterprise capital structure on the product market competitiveness. The first viewpoint argues that the capital structure decision-making has a strategic interaction effect on the product market competitiveness, and that increasing the liabilities of enterprises is able to strengthen their market competitiveness. On the contrary, the second viewpoint considers that the capital structure decision-making has a conservative financial impact on the product market competitiveness, and that decreasing the liabilities of enterprises can enhance their product market competitiveness. Meanwhile, the enterprise capital structure decision-making also has an influence on the enterprise competitive strategy. Proper capital structure decision-making can support the implementation of the enterprise competitiveness strategy, help enterprises obtain competitive advantage and enhance product market competitiveness. Finally, this dissertation empirically researches the effect of the capital structure decision-making on the market competitiveness in light of the related theoretical study. This dissertation collects the data of 611 companies which only issue A share from 2002 to 2006 in Shenzhen and Shanghai, and analyzes the effect of enterprise capital structure decision-making on the enterprise product market competitiveness, on the basis of the effect of controlling enterprise scale, the ability of cost control, the property of products, and macro-economic factors on the enterprise product market competitiveness. Product market competitiveness is measured in terms of three indicators, i.e., market share of enterprises in the industry, relative profit capability and relative development ability. In addition, product market competitiveness is measured through factor analysis to build public factors. Empirical results show that, in China's market competition, corporate debt levels have a negative impact on the competitiveness of the market, the higher the asset liability, the lower the competitiveness. The result supports the viewpoint of the financial conservative effect.