Product Market Competition And Corporate Internal Governance Mechanism From The Perspective Of Interaction

Since the 1930s, scholars proposed the concept of corporate governance, it has become important research subject all around the word, and has formed varieties of corporate governance theory.Corporate governance can be divided into internal governance mechanism and external governance mechanism, however, the majority study about corporate governance is limited within the internal governance mechanism, neglects the study of external governance, such as product market competition.This article mainly research the interaction relationship(synergic or alternative)between product market competition,which is part of the external governance mechanism,and internal governance mechanism. Based on the related theory of product market competition and corporate governance,we divide the internal governance mechanism into four sections, a total of 14 variables, and we select HHI as representative of product market competition, which are key factors of empirical research. With the help of theoretical analysis and empirical analysis methods, we find that product market competition has the alternativerelationship with internal governance mechanismin strongly competitive industry, which means thatthe improvement of the internal governance mechanisms has limited impact to enhance enterprise value in the highlycompetitive industry, instead, the company in the weakly competitive industry should focus on improving internal governance mechanism to improvethe enterprise value.In addition, product market competition has the alternativerelationship with executive(the directors board and the supervisors board)compensation, two sessions(the directors board and the supervisors board) scale and the structure and scale of managers(the setting rules about both general manager and chairman and the scale of managers) in the stronglycompetitive industry;and has the synergicrelationship with executive(the directors board and the supervisors board)compensation, and two sessions(the directors board and the supervisors board) scale in the weaklycompetitive industry.Therefore,the article suggested that enterprise managers should analyze the competition degreeabout industry which the company belongs to, thus it will help managers choose effectivelyinternal governance mechanismto enhance the corporate performance. What’s more, the government officials should introduce market competition mechanism, to some extent, which can replace internal governance mechanism. It will attain the result with half effort to make different management policies for strongly and weakly competitive industry.