Product Market Competitiveness Impact On The Profitability Of Listed Companies

Corporate governance as a solution to problems arising from the separating of ownership and control of modern corporate, which received extensive attention of the academia and industry sector on a global scale. Academic research about corporate governance focuses on the influence of the internal governance structure on corporate performance, which believe that perfect corporate governance structure can solve the principal-agent problems, reduce agency costs, improve the performance of company. This paper argues that in order to improve the company’s profitability, to capture competitive advantage in the competitive market is more important, not only to perfect the corporate governance, because the improvement of the governance structure does not directly improve the efficiency of the company, so we should pay more attention to the company’s product market competitiveness. Whether corporate governance structure to be effective, there are all sorts of reasons, but one of the most important rigid constraint is the fair mechanism of the product market and fully competitive. The product market competitiveness is one of the external governance mechanism, but how does it influences the company’s profitability, the research conclusion is disputed in academic circles.Product market competitiveness, it is a combination of micro and macro indicators, not only reflect the competition of micro individual companies facing, but also reflect the degree of competition of the industry, after the comprehensive comparison of the advantages and disadvantages of various indicators, this article selects Herfindahl-Hirschman Index(HHI for short) as the index of product market competitiveness of industry, selects the ratio of expenses to sales to measure the product market competitiveness which faced by micro individual companies. This paper use factor analysis method to calculate the individual company’s profitability index, namely the explained variable of the regression model in the empirical part, use listed companies of Shanghai and Shenzhen in2010-2012as samples, after study on the industry’s product market competitiveness and the single company’s product market competitiveness affect corporate profitability, this article make further study on the interaction between the two competitiveness. Empirical study results show that:(1) there is a significantly positive correlation between single company’s product market competitiveness and corporate profitability, namely the stronger the individual company’s product market competitiveness, the stronger the corporate profitability;(2) the lower product market competitiveness of industry (the stronger monopoly of industry), the stronger of the company’s profitability, and industry’s monopoly and individual company’s product market competitiveness in the presence of substitution effect on improving corporate profitability;(3) in the same industry, the higher management efficiency of company, the stronger profitability it is, among different industries, the more competitive industry is, the higher management efficiency of company.(4) there is a significantly positive correlation between industry’s product market competitiveness and the company’s labor productivity. For the empirical conclusion, the article finally proposed the following advices:the government should promote market construction, breaking monopoly, establish fair and effective product market competition, promote the effective competition of industry.