Empirical Study On The Effect Of Different Market Competition On Capital Structure

It is well known that the market competition and the capital structure decisions are of vital importance during the companies’living and developing periods. However, for a long time, these two important decisions have been artificially divided into two separate fields for a long time. Until1980’s, the interaction between these two decisions has aroused the attentions of scholars.Based on market competition, this paper made empirical analysis of how market competition affected on capital structure, and then tried to explore the deep relationship.Firstly, this paper described the current situation of market competition, described and chose method to classify different industries based on market competition, then chose HH1to classify them.Secondly, based on data of listed companies in Shanghai and Shenzhen A Share from2008to2010, this paper selected perfect competition group and monopolistic competition group as samples. Extracted by factor analysis, this paper got two common factors to present market competition. Then established a multiple linear regression model to analyze the effect of market competition on capital structure. The empirical results showed that both in perfect competition group and monopolistic competition group, the market competition had a significant negative effect on capital structure; in monopolistic competition group, however, the effect was much more obvious.Finally, this paper summarized the conclusions and explained the reasons. Then pointed out the shortcomings and limitations of this study.