Research On The Relationship Between Capital Structure And Product Market Competition

Capital structure and financing structure can be called, it refers to the various sources in theenterprise to raise funds,as well as an integral part of the correlation coefficient between thevarious funds Modigliani and Miller (1958) in his thesis paper for the first time under idealconditions proposed enterprise value and capital structure unrelated to the proposition that MMtheory. Since then the business, management and financial sector corporate capital structure theoryhas become an important issue. Product market competition as an important external environmentalfactors affect the capital structure decisions of enterprises.All along, various scholars in the capitalstructure of the enterprise strategy and its behavior in the product market competition is conductedseparately for the conduct of the study. However, since the beginning of the1980s, economistsbegan to study from a different perspective between. The study found corporate capital structuredecisions and their behavior in the product market competition between endogenous relationshipexists, reinforce each other. First, the level of corporate profits will be affected product marketcompetition, profits are affected inevitably have an impact on the financial position of theenterprise, thus limiting the amount of debt financing business is current, and ultimately thebehavior of market competition, the company’s products on its capital structure decisions had animpact. Secondly, under the production conditions of competition and price competition, due to theuncertain nature of the debt will increase or decrease allows companies have different strengths andweaknesses in the product market competition. Thus competition structure for how to combine thetwo companies gain a competitive advantage, good performance, and promote the healthydevelopment of listed companies has important theoretical and practical significance.In this paper, the modern capital structure theory, product market competition theory, theintegrated use of the theory and econometric methods, statistical analysis methods, theoreticalanalysis and empirical analysis. First systematic exposition of the modern theory. Secondly, theintroduction of the company’s capital structure and mechanism of listed companies product marketcompetition affect each other, and focuses on the intensity of competition in the market under theproduct, the product market strategy, the impact of product market competition environment oncapital structure, as well as price competition and competition conditions yield capital structure on product market competition. Third, first analyzes the current situation of China’s home applianceindustry, then playing in the empirical part of the main product market competition by usingindicators, asset-liability ratio index for empirical analysis. In this paper, China’s home applianceindustry, selected A-share listed companies in2010-201240companies as samples, usingcross-sectional and time-series data mixed regression models, empirical results show that the extentof the capital structure of listed companies and enterprises are facing competition in productmarkets has a negative correlation, that companies will adopt a more conservative financialstrategy to deal with the fierce market competition. Finally, based on the foregoing analysis, thispaper summarizes the conclusions on the basis of the proposed policy recommendations.