A Research Of The Effect Of Product Market Competition On Capital Structure

Before the1980s, capital structure belongs to the research contents in finance, and product market competition belongs to the category of industrial organization theory. The study of the company’s capital structure and product market competition has been carried out independently. Traditional theory of capital structure of the company as an independent unit to analyze and the default product market, investment opportunities, investment environment is given, based on analysis of the existence of the optimal capital structure and its influencing factors, come to make maximize the value of the company’s capital structure and morphology. Research on industrial organization theory is mostly based on the enterprise profit maximization hypothesis to competition strategy decision-making, ignoring the possible effect of capital structure on product market competition. Meanwhile, scholars often find similar companies in the same industry have very different capital structure. The traditional capital structure theory can not explain this phenomenon. Since Brander and Lewis (1986) using the strategic commitment theory initiated the relationship between the enterprise’s debt financing decision-making and the product market competition in1980s. The relationship between financing structure and the product market competition had attracted the domestic and foreign scholar’s widespread attention. Since then, 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.On the basis of this article in the capital structure and product market competition between the previous theoretical study of the course of development and current status of the research, clear need to solve the problem. After analyzing the differences and shortage in the traditional theory researches, the paper introduces our country’s specific economy system background——integration of coal resources in Shanxi. Based on2002-2011quarterly data of11listed companies of the Shanxi coal industry, empirically analyzes the influence of product market competition on the Shanxi coal industry listed companies before and after the integration of coal resources. The results showed that, before integration, Shanxi coal industry listed companies’ capital structure and product market competition negatively correlated, after integration, the relationship between the two is a positive correlation. Finally, based on the result of the empirical research, I had put forward the policy recommendations in optimizing the capital structure of listed company of the Shanxi coal industry.