How does capital structure change product-market competitiveness? Evidence from Chinese firms

Li Li and Zixuan Wang

PLOS ONE, 2019, vol. 14, issue 2, 1-14

Abstract: Finance research shows capital structure has an important effect on the product-market competitiveness of firms. Our paper documents an asymmetric effect of capital structure on firms’ competitiveness in a sample of Chinese firms. Firms whose capital structure is characterized by a low leverage but rapid leverage growth has a dominant position in their product market. The industry average leverage ratio is also a critical factor influencing firms’ competitiveness. High debt levels hinder firms’ competitiveness. The influence of capital structure on firms’ product-market competitiveness varies based on the extent of industry concentration. In highly concentrated industries, high leverage level and slow leverage growth suppress firms’ competitiveness to a larger extent compared with industries with low concentration.

Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0210618

DOI: 10.1371/journal.pone.0210618

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