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Product market competition and dynamic adjustment in capital structure

Frontiers of Business Research in China volume 4, pages 101–129 (2010)Cite this article

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.

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Authors and Affiliations

  1. School of Business, Renmin University of China, Beijing, 100872, China

    Fuxiu Jiang & Yan Li

  2. School of Business, Guangdong University of Foreign Studies, Guangzhou, 510420, China

    Yaohui Qu

  3. Guanghua School of Management, Peking University, Beijing, 100871, China

    Zhengfei Lu

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  1. Fuxiu Jiang
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  2. Yaohui Qu
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  3. Zhengfei Lu
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  4. Yan Li
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Correspondence to Fuxiu Jiang.

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Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2008, (4): 99–110

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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

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