An Empirical Study On Cost And Differentiation Of Product Influencing Financial Structure

Since the1980’s,Brander and Lewis took the lead in linking the capital structure and product market,the relationship between these two areas has become an important research topic in company finance and industry economics. For years,with further research, scholars gradually extend their research from the relationship between the capital structure and product market to that between debt structure and product market. The research on the relationship between financial structure and product market has two main aspects:on one hand from the perspective of the debt decision studying how the amount of debt and debt maturity influences the firm’s production capacity, the price of products and its performance, on the other hand from that of product market competition studying how the factors of product market affect debt level and debt maturity.With the competition more and more fierce, reducing product cost and improving the level of product differentiation has become an important method in product market competition. This thesis starts from this point,studying the influence on financial structure caused by cost and differention of the product. And then we provide empirical proofs based on the factual economic data in manufacturing industry from the year2006to2010using Simultaneous Equations Model which reflects the internal relationship between the capital structure and debt structure.We find that the cost has positive interrelationship to capital structure and debt structure and the differention is negatively correlated to those.Capital structure and debt structure has positive interrelationship. So we get the conclusion that,considering the internality of capital structure and debt structure, financial structure is not only influencd by factors of firm’s features but also influencd by the cost and differention of the product.