The Impact Of Overcapacity In The Steel Industry On Stock Prices

Because the main content of the article is to study the impact of overcapacity in the steel industry on stock prices.Therefore,we firstly need to explain the meaning of overcapacity,how to judge whether overcapacity occurs,and how to describe the seriousness of overcapacity.The second is to measure the capacity utilization rate,which is the core indicators of overcapacity.After comparing the four main methods of measuring the capacity utilization rate,the output-capital ratio method,the cost function method and the DEA,the paper finally chose the DEA method to measure the annual capacity utilization rate of those enterprises whose market value exceeds 10 billion(In November 2018).Finally,based on a reasonable description of overcapacity,this paper uses a fixed effect model to analyze the relationship between overcapacity and stock price in the steel industry.The study found that there is a negative correlation between overcapacity in the steel industry and the stock price of steel companies.When overcapacity tends to be serious,that is,when the capacity utilization rate of enterprises decreases,the social inventory of steel products increases,and the price of steel products declines,the stock price of steel companies tends to decline;and as overcapacity decay,the stock price of steel companies will rise.The main contributions of this paper are mainly in the following three aspects.The first is to verify the effectiveness of China's stock market,and believe that China's stock market has relative efficiency,and the overcapacity in the steel industry will cause stock prices to fall.The second is the latest explanation for the definition of capacity production,the identification of overcapacity and the description of overcapacity.Finally,the "barometer" function of the stock market is pointed out.Relevant investors or government departments can use the stock price information to make a reverse judgment on the overcapacity of the industry.