Product Market Competition,executive Incentive And Capital Structure Adjustment Speed

Capital structure decision-making is an important financial decision of the enterprise,which has a significant impact on the enterprise value.Because the dynamic capital structure theory that has emerged in recent years is more in line with the actual situation of the enterprise,so the dynamic adjustment of the capital structure of enterprises becomes a research hotspot.The theory holds that the enterprise has a target capital structure,at this time,the enterprise value is maximized.However,the real capital structure deviates from the target value within a short period of time due to the change of the company's environment.A large number of researches show that in order to maximize the value of the enterprise,the actual capital structure is in the course of constantly adjusting to its target capital structure.Therefore,the problem of how to improve the speed of adjustment has drawn widespread attention in the academic field.The existing literature mainly study the influencing factors of the speed of the capital structure adjustment from the objective factors of the company.In fact,the company's executives have greater discretion in the financial decision-making,and control the financial decision-making.but there is a serious agency problems in modern companies,according to principal-agent theory,executive incentive is an effective tool to alleviate the agency problem.Therefore,in recent years,some scholars have begun to study the influencing factors of capital structure adjustment speed from the perspective of executive incentive.However,this part of the research neglects to include implicit incentive which executives pay more attention under thebackground of compensation control into the research category of executive incentive,and then fully examine the impact of executive incentive on the company's capital structure adjustment speed.And this is exactly one of the problems that this paper is trying to study.In recent years,the market competition that companies face is more and more fierce.The product market competition is considered as one of the important external governance mechanisms,the pressure brought by it will not only directly affect the rate of the company's capital structure adjustment,but also the research shows that the product market competition have a governance effect on executives,and thus affect the explicit incentive effect of executives.However,the existing research on the influence of executive explicit incentive on the speed of capital structure adjustment have neglected the influence of the external governance mechanism of product market competition.So what is the regulatory role of product market competition in the relationship between the explicit incentives for listed companies and the speed of capital structure adjustment? This is another issue that this article hopes to explore.Based on incentive theory,capital structure theory and market competition theory,this paper uses normative research and empirical research methods,takes the dynamic equilibrium balanced panel data of all the A-share Chinese listed companies from 2011 to 2016 as a sample to examine the effect of product market competition and executives incentive on the speed of the capital structure adjustment respectively,and further explore the regulation effect of the product market competition on the relationship between the executive explicit incentive and the capital structure adjustment speed.In the process of examining the influence of executive incentive on the speed of capital structure adjustment,this paper considers the four types of executive incentives,that is compensation incentives and equity incentive,which represent the explicit incentive,promotion incentive and perks,which represent the implicit incentive.Finally,the following conclusions are drawn:(1)There is a significant positive correlation between compensation incentives and the speed of capital structure adjustment,and there is a significant negative correlation between equity incentive and the speed of capital structure adjustment.(2)Promotion incentive and perks both have a positive correlation with the speed of capital structure adjustment.(3)There is a significant positive correlation between the product market competition and the speed of capital structure adjustment.(4)The product market competition has positively adjusted the relationship between compensation incentives and capital structure adjustment speed,and negatively adjusted the relationship between equity incentive and capital structure adjustment speed.The conclusions of the study have a strong theoretical and practical significance for improving the corporate governance mechanism and deepening the awareness of optimizing and adjusting the capital structure in the transition economy.