Debt Financing, Large Shareholder Expropriation Of Funds And Industry Competition

A huge profit in the industry is the dream of every company, and this was the power inherent in the company among the industry. A company in order to obtain a long-term development needs to enhance the competitiveness and grown in strength in the industry continually. The competitiveness in the industry of a company was related to its survival and development, which was every company, should be concerned. Many scholars have pointed out that competition in the industry is one of the most important factors that affected optimal capital structure of Chinese listed companies. All of above reflects the importance of competition in the industry. However, some of the study shows that large shareholders in order to maximize their own interests often take the form of pass-through fund to achieve its purpose, and damage the company's industry competitiveness. China since April 26, 2002, issued the notice about "conduct of listed companies on the establishment of modern enterprise system and check"and after the August 28, 2003, the SFC and SAC jointly issued "on the Listed Company and related parties movements of capital and listed companies about external security notice."However, the issue of large shareholders used the company's funds have not been good governance.How to mitigate the amount of the company's used funds, and to enhance the competitiveness in its industry, which is a serious subject placed in front of listed companies in China. Some researches have been shown that debt financing could play a certain treatment effect. But could the liability inhibit the major shareholder used the funds of the company, and then in turn to enhance the competitiveness of listed companies in the industry? This question has not been concerned by most of scholars. Therefore, this paper study to examine the relations about Debt Financing and Large Shareholder Expropriation of Funds with the Industry Competition about the Chinese listed companies. And this article attempts to answer the question that nowadays competition situation in the industry of the listed companies. And whether Liabilities could be a governance mechanism to inhibit the amount of funds used to further the company's impact on competition in the industry? This paper attempts to add some useful things on the existing literature.Use the non-financial listed companies and the company's industry competition as the research object in the year from 2007 to 2009's data as samples, this paper used the empirical method to examine the influence about debt financing of listed companies and Large Shareholder Expropriation of Funds exerts in Industry competition. We found that: First, the more serious about Large Shareholders Expropriation of Funds in the company, the lower about the company's Industry Competition. Second, Debt Financing could inhibit the behavior about large shareholders expropriation of the company's funds, and then enhance the company's Industry Competitiveness. Hoped this paper could extend the researches about debt financing's governance function, and fulfill the industry competition's study. All of this has the related theoretical value.