The Dynamic Research Of Product Market Competition And Capital Structure Adjustment

Corporate capital structure, also known as the financing structure of a corporate, is the long-term funding sources, the composition and the correlation. Since Modigliani and Miller (1958) in his groundbreaking thesis,"the capital structure and corporate value"said that in under ideal conditions the corporate value has nothing to do with corporate capital structure. the corporate capital structure has been important issue in the field of a business, a management and a financial theorists.Trade-off theory suggests that the capital structure affects the value of enterprises in the real world, because of the existence of corporate tax, bankruptcy and agency costs and so on. The corporate has an optimal capital structure maximizing the corporate value. And there's an adjusting tendency to optimal capital structure. As an important outside factor, Product Market Competition affects the capital structure decision. The capital structure decision is that basing on the change of inside and outside situation, is adjusting to target capital structure in order to ensure finance safety and realize the maximizing corporate value.This paper analyses the influence of production market competition on the capital structure adjustment to the optimal one, we also discuss the influence of production market competition intensity and company competitive forces on adjusting speed of capital structure in different types of production market competition. According to the statistics in listed companies' l financial reports in the year from 2000 to 2007, descriptive statistics from industry competition and character of capital structure and capital structure adjustment, find that different types of production market competitions have appreciable impact on Capital Structure of listed companies, especially, monopolized industry's Assets Liabilities Ratio is high and the bias from target capital structure is big. By making Capital Structure Dynamic Adjustment model and using panel data to build a fixed variable intercept model. This paper makes Empirical Analysis on listed companies in the year from 2000 to 2006, we find that production competitive forces are in the same adjusting direction with Capital Structure. Comparing to the competitive trades, monopoly industries adjusting speed of capital structure is fast and the deviation is more than 1. Exceeding adjustment can be seen in the monopoly industries. The more competitive the company is, the faster adjusting speed of capital structure is. This paper studies that product market competition influence s capital structure from three levels of product market competition including competition type, Competitive Intensity and competitive forces. Make up for the deficiency of only thinking of Competitive Intensity. At the same time, by studying the relation of product market competition and capital structure adjustment, this paper makes product market competition the relation with capital structure and firm's value, and systematically explains the financing behavior of firm in the different situations and provides reference for decision of financing.