The Study Of The Correlationship Between Product Market Competition Performance And Corporate Capital Structure

The effect of capital structure on product market is ignored in quite a long period of time. They were separately studied in Industrial Economics and Finance areas.In the earlier Industrial Economics studies, the corporate capital structure and corporate financial distress were regarded exogenous, and these studies focused only on the price and yield decision-making of product, including a variety of price competition and non-price competition decision, to achieve maximum profit thus ignoring strategy differences incured by the capital structure difference. While in Finance area, the cash flow generated by the business and product market competition strategy were regarded exogenous and only studied from the the Finance perspective. At last, it turned out that it is difficult to provide a reasonable explanation for certain acts of the enterprise in this two separate frameworkIn the The mid1980s, Brander and Lewis published a paper named "the oligopoly and capital structure:limited liability effect" in the American economic review,which initiated the combining study of product market competition behavior and enterprise capital structure. After that, the relationship between the product market and the capital structure were paid more attention by the two areas. In recent years, the development of western industry economic theory shows that the company’s capital structure decision-making is a comprehensive choice based on the product market competition environment, corporate strategy and capital market environment. Therefore,there is an inextricable link between the company’s capital structure and product market perform.Firstly, this paper analyzed some theory behind this connection. Secondly,based on the datas of companies of11industries listed in Shanghai and Shenzhen exchange, this paper performed an empirical research of the certain impact of capital sructure on product market and showed that the affect direction of the asset-liability ratio and long-term debt ratio on the performance of product market is not entirely consistent. Thirdly, this paper gave some capital structure decision-making suggestion based on above study.