The Study On The Interaction Relationship Between Product Market Competition And Inner Corporate Governance

From the1970s, scholars have paid much more attention on corporategovernance. However, the researches on corporate governance level and corporategovernance mechanisms are difficult to form a unified opinion. Therefore, we canconsider corporate governance in a new perspective. Research on the interactionbetween external governance mechanisms and internal governance mechanisms andtheir impact on firm performance are undoubtedly a new perspective.This paper takes Chinese listed companies which are in the transition economiesas the research object. It studies the impact of product market competition which is anexternal governance mechanism on corporate performance. It also studies theinteraction between product market competition and the internal mechanisms. It hastheoretical significance on product market competition. It also has practicalsignificance on how to improve corporate governance and how to establish policies toimprove the market to increase corporate performance.Firstly, based on the related literatures, this paper combines corporategovernance theory and product market competition theory, analyzes the impact ofproduct market competition on corporate performance and the Possible relationshipbetween corporate governance and product market competition.Secondly, based on the related literatures，this paper selects inner corporategovernance variables, product market competition variable and corporate performancevariable. It establishes an evaluation system to assess the level of corporategovernance. This system is composed of5indicators and19secondary indicators. The5indicators are ownership structure, board governance, the supervisory boardgovernance, executive incentive and control variables.Thirdly, it selects the listed companies in2009-2012as sample to do empiricalanalysis. Through regression analysis it extracts key internal governance variables. Inthe following empirical analysis, it uses key internal governance variable asrepresentative of corporate governance.Fourthly, it uses regression analysis and structural equation modelingrespectively to analyses the interaction between product market competition,corporate performance, and inner corporate governance. On the one hand, it analyses the difference of corporate performance and corporate governance under differentproduct market competition by regression analysis. On the other hand, it establishesstructural equation model to discuss the relationship between product marketcompetition, corporate governance and corporate performance.Lastly, after the empirical analysis, it draws the conclusion that it existcomplementary relationship between product market competition and corporategovernance. It also finds that product market competition has negative impact oncorporate performance.