A Study On The Effect Of Debt To Product Market Competition

With the development of cross-disciplinary research, more and more scholars began to study the impact of debt to product market competition.Ini business management practice, how the relationship between debt and product market competition of the listed company is an important issue. Therefore, a study on the effect of debt to product market competition has important theoretical value and practical significance. This text collects samples of397companies from2000to2012to study the effect of debt to product market competition by studying the effect of total debt, debt structure and debt mode to product market competition and by studying the existence of non-monotonic of the effect. So we can provide some advice for managers of the listed companies to improve their product market competition.The full text is divided into five chapters. The first chapter is the foreword. It introduces research background on the theory and practice, introduces research purpose and meaning on trying to provide some empirical evidence for the corporate financial strategy theory, possible improvements and innovations on researching the effect of interest-bearing debt ratio and non-interest bearing debt ratio and debt mode to product market competition and the existence of non-monotonic of the effect. The second chapter is an overview of the theory and research literatures. It introduces the theoretical models of the limited liability effect and the deep pockets effect, and gives a review of the research literatures on the impact of the company’s debt to product market competition over the world. The third chapter is the empirical research design. It proposes the research hypothesis of the effect of total debt, debt structure and debt mode to product market competition and the research hypothesis of the existence of non-monotonic of the effect, designs the corresponding models and variables. The fourth chapter is the results of empirical testing and results analysis. It tests the effect of total debt and debt structure to product market competition. And based on this, it deepens the study of the effect of debt mode to product market competition and the existence of non-monotonic of the effect. The fifth chapter is the conclusion of the text. It gives conclusions and the corresponding explanations of this text and gets some recommendations.Empirical results of this text are:(1) The higher total debt ratio, the higher product market competition, but interest-bearing debt ratio weakens the positive correlation effect of total debt to product market competition;(2) The higher non-interest bearing debt ratio, the higher product market competition;(3) The effect of total debt to product market competition is an inverted U-shaped non-monotonic relationship, when the total debt ratio is lower than the industry average of about1.53times the standard deviation, the higher total debt ratio would higher product market competition, but when the total debt ratio is higher than the industry average of about1.53times the standard deviation, the higher total debt ratio would lower product market competition;(4) Debt improves the revenue growth, but may not be able to improve the operating profit growth rate and the growth rate of net operating cash. Based on research findings, the listed companies have to be alert to interest-bearing debt. In order to improve product market competition, the listed companies have to use non-interest bearing debt as much as possible. The listed companies have to control total debt ratio over the industry average of approximately1.53times the standard deviation.