- Research Article
- Published:
Product market competition and dynamic adjustment in capital structure
Frontiers of Business Research in China volume 4, pages 101–129 (2010)
Abstract
Based on the balanced panel data of Chinese listed firms from 1999 to 2004, this paper studies the relationship between product market competition and dynamic adjustment in capital structure. Results show that, from both static and dynamic perspectives, product market competition and its changes have significant influence on the degree of deviation of a firm’ s present capital structure from its targeted one. Specifically, the more intensive the product market competition, the smaller the capital structure deviation. Meanwhile, capital structure deviation tends to decrease in a market characterized by increasingly fierce competition. However, evidence also reveals that product market competition and the speed of the capital structure adjustment are independent from one another.
References
Antoniou A, Guney Y, Paudyal K (2002). Determinants of corporate capital structure: Evidence from European countries. Working paper, University of Durham
Banerjee H, Heshmati A, Wihlborg C (2000). The dynamics of capital structure. Stockolm School of Economics, Working paper series in Economics and Finance, No.333
Bolton P, Scharfstein D (1990). A Theory of predation based on agency problems in financial contracting. American Economic Review, 80: 93–106
Booth L, Aivazian V, Kunt A D, Maksimovic V (2001). Capital structure in developing countries. Journal of Finance, 56(1): 87–130
Brander J, Lewis T (1986). Oligopoly and financial structure: The limited liability effect. American Economic Review, 76: 956–970
Brander J, Lewis T (1988). Bankruptcy costs and the theory of oligopoly. Canadian Journal of Economics, 21: 221–243
Byoun S (2008). How and when do firms adjust their capital structures toward targets? Journal of Finance, 63: 3069–3096
D’Mello R, Farhat J (2002). A comparative analysis of proxies for target capital structure. Working Paper
De Jong A, Nguyen T T, Mathijs M A (2007). Strategic debt: Evidence from bertrand and cournot competition. SSRN Working paper
Dittmar A, Thakor A (2007). Why do firms issue equity? Journal of Finance, 62: 1–54
Evgeny L (2002). Capital structure and interaction among firms in output markets: Theory and evidence. Research paper, 29th annual meeting of European Finance Association, Berlin, Aug, 2002
Fischer E O, Heinkel R, Zechner J (1989). Dynamic capital structure choice: Theory and tests. Journal of Finance, 46(1): 297–355
Flannery M, Rangan K P (2006). Partial adjustment toward target capital structures. Journal of Financial Economics, 79(3): 469–506
Graham J R, Harvey C R (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60: 187–243
Gujarati D N (2000). 计量经济学 (Econometrics). Third Edition. Trans.: 林少宫 (Lin Shaogong). 北京: 中国人民大学出版社, 594
Heshmati A (2002). The dynamics of capital structure: Evidence from Swedish micro and small firms. Research in Banking and Finance, 2: 199–241
Jalivand A, Harris R (1984). Corporate behavior in adjustment to capital structure and dividend targets: An econometric study. Journal of Finance, 39(1): 127–145
Kraus A, Litzenberger R (1973). A state-performance model of optimal financial leverage. Journal of Finance, 28: 911–922
Levy A, Hennssy C (2007). Why dose capital structure choice vary with macroeconomic conditions? Journal Monetary Economics, 54: 1545–1564
Liu L X (2005). Do firms have target leverage ratios? Evidence from historical market-to-book vand past returns. SSRN Working paper
Lööf H (2004). Dynamic optimal capital structure and technical change. Structural Change and Economic Dynamics, 15: 449–468
Modigliani F, Miller M (1958). The cost of capital, corporation finance and the theory of investment. American Economics Review, 48: 261–297
Nickell S (1996). Competition and corporate performance. Journal of Political Economy, 104: 724–746
Rajan R G, Zingales L (1995). What do we know about capital structure: Some evidence from international data. Journal of Finance, 5(12): 1203–1235
Rajbhandary A (1997). Capital structure of firms in developing countries: Results for India. Unpublished Manuscript
Schnitzer M, Wambach A (1998). Inside versus outside financing and product market competition. Discussion Paper of the Munich Economics Department, No. 25-98
Scott J H (1976). A theory of optimal capital structure. Bell Journal of Economics, 7: 33–54
Sheridan T, Sergey T (2007). A dynamic model of optimal capital structure. Review of Finance, (11)3: 401–451
Shinichi N, Naohiko B (2004). Dynamic capital structure of Japanese firms: How far has the deduction of excess leverage progressed in Japan? Bank of Japan Working Paper Series
Showalter D (1995). Oligopoly and financial structure: Comment. American Economic Review, (85)3: 647–653
Telser L (1966). Cutthroat competition and the long purse. Journal of Law and Economics, 9: 259–277
Tirole J (2007). 公司金融理论 (The Theory of Corporate Finance). Trans.: 王永钦等 (Wang Yongqin et al.). 北京: 中国人民大学出版社
Tucker J and Evarist S (2007). Long and short run capital structure dynamics in the UK: An industry level study. SSRN Working paper
Wanzenried G (2000). Capital structure decision and output market competition under demand uncertainty. http://www-vwi.unibe.ch/theory/papers/wanzenried
姜 付秀, 刘 志彪, 陆 正飞 (Jiang Fuxiu, Liu Zhibiao, Lu Zhengfei) (2006). 多元化经营、 企业价值与受益波动研究 (Diversification, firm’s value and earnings fluctuation: An empirical research based on Chinese listed firms). 财经问题研究, (11): 27–35
连 玉君 (Lian Yujun) (2005). 中国上市公司资本结构动态调整机制研究 (The dynamic adjustment of firms’ capital structure in China). Working Paper, 经济发展论坛
刘 志彪, 姜 付秀, 卢 二坡 (Liu Zhibiao, Jiang Fuxiu, Lu erpo) (2003). 资本结构与产品市场竞争 (Capital structure and product market competition). 经济研究, (7): 60–67
陆 正飞, 高 强 (Lu Zhengfei, Gao Qiang) (2003). 中国上市公司融资行为研究—基于问卷调查的分析 (Study on financing behavior of listed companies in China-Analyses based on a questionnaire). 会计研究, (10): 16–25
屈 耀辉 (Qü Yaohui) (2006) 中国上市公司资本结构的调整速度以及影响因素 (Adjustment speed and its determinants of capital structure of Chinese listed companies: An empirical analysis from unbalanced panel data). 会计研究, (6): 56–63
童 勇 (Tong Yong) (2004). 资本结构的动态调整和影响因素 (Dynamic adjustment of capital structure and the determinants). 财经研究, (10): 96–104
王 皓, 赵 俊 (Wang Hao, Zhao Jun) (2004). 资本结构动态调整模型 (Study on the model of dynamic adjustment of capital structure). 经济科学, (3): 54–62
肖 作平 (Xiao Zuoping) (2004). 资本结构影响因素和双向效应动态模型 (Determinants of capital structure and a two-way effects dynamic model). 会计研究, (2): 36–41
赵 蒲, 孙 爱英 (Zhao Pu, Sun Aiying) (2004). 财务保守行为: 基于中国上市公司的实证研究 (Financial conservatism: An empirical study on China’s listed firms). 맜理世界, (11): 109–119
朱 武祥, 陈 寒梅, 吴 迅 (Zhu Wuxiang, Chen Hanmei, Wu Xun) (2002). 产品市场竞争与财务保守行为—以燕京啤酒为例的分析 (Product market competition and financial conservatism: A case study of Yanjing Beer). 经济研究, (8): 28–37
Author information
Authors and Affiliations
Corresponding author
Additional information
__________
Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2008, (4): 99–110
Rights and permissions
About this article
Cite this article
Jiang, F., Qu, Y., Lu, Z. et al. Product market competition and dynamic adjustment in capital structure. Front. Bus. Res. China 4, 101–129 (2010). https://doi.org/10.1007/s11782-010-0005-3
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11782-010-0005-3