The Research On The Relationship Between Product Market Competitive Strategy, Capital Structure And Corporate Performance

In circumstance the market competition is becoming more fierce,enterprises which want to long-term survival and development must build abroad ability and core competence. As a key problem in enterprise corecompetence improving,the enterprise’s choice of strategy determines whethercreate continued competitive adwantage. In financial prospective, productmarket competitive strtegy infulences enterprise’s financing decesion by put animpact on enterprise investment,so we have evidence to believe thatcompetitive strategy will affact enterprise’s capital structure. It means that ifdifferent enterprises in same industry adopt different competitive strategy, thecapital structure also differ between each other. Modern capital structuretheory consider that under the efficient capital market condition, the alterationof capital structure have an impact on enterprise’s value. Therefore, to study itsinfluence on capital structure and corporate performance from the point ofcompetitive strategy has important practical significance.This article research the relationship between product market competitivestrategy, capital structure and corporate performance based on the data oflisted company in Chinese stock market, and attempt to answer the followingquestions: whether product market competitive strategy affect the capitalstructure or not? The interaction between product market competitive strategyand capital structure will have what kind of impact on corporate performance?To research this questions, this article start by reviewing of related theory andliterature. On the basis of theory analysis, this article use mixedcross-sectional sample data between2003and2006to research the generaland industry characteristics of Chinese listed company’s captial structure bydescriptive statistics, ANOVA and mean test. It provides evidence for raisinghypothesis and controlling industry variable in followding research. After that,by correlation analysis and construcing multiple linear regression model, thisarticle research the impact that competitive strategy have on capital structureand impact that capital have on corporate performance under different competitive strategy.By theoretical and empirical research, this article obtain following mainconclusions: first, there exist relationship between product market competitivestrategy and capital structure, while the cost leadship strategy and capitalstructure show positive relationship,but differentiation strategy and capitalstructure show negative. Second, the relationship between product marketcompetitive strategy and corporate performance is positive, differentiationstrategy have more significant influence on corporate performance than costleadship strategy. Third, in circumstances without considering competitivestrategy, the capital structure and corporate performance show negativerelationship because of the equity financing preference among Chinese listedcompanies. Forth, the interaction between product market competitive strategyand capital structure has significant impact on corporate performance, whileleverage can improve corporate performance under cost leadship strtegy, butlet corporate performance down under differentiation strategy. Lastly, wesummarize the theoretical and empirical research conclusions, and inconnection with the capital structure charactistics of Chinese listed companyand institution background, we offer some suggestions to enhance thegovernance fuction of listed company debt, optimize capital structure andimprove corporate performance.