Product market competition and firm financial performance: The mediating role of capital structure and the moderating role of firm size
Mahdieh Kamran
1
(
)
Samaneh Agha Kazem Shirazi
2
(
Department of Accounting, Faculty of Humanities, University of Science and Culture, Tehran, Iran
)
Maryam Dalir Zahan
3
(
Department of Accounting, Faculty of Humanities, University of Science and Culture, Tehran, Iran
)
Keywords: Product Market Competition, Financial Performance, Capital Structure, Firm Size,
Abstract :
This study examines the impact of product market competition on firms' financial performance and analyzes the partial mediating role of capital structure and the moderating effect of firm size. Financial data from companies listed on the Tehran Stock Exchange from 2013 to 2022 were analyzed using panel data regression models. The results indicate that product market competition has a direct and positive effect on firm performance, but this relationship is partially mediated through capital structure. In other words, capital structure acts as a partial mediator, moderating the impact of competition on financial performance.
Capital structure in competitive environments shows a contradictory effect on performance, which can be attributed to infrastructural constraints, financial market volatility, and challenges in accessing financial resources in Iran. Additionally, the moderating role of firm size was investigated, revealing that, contrary to expectations, larger firms exhibited lower financial performance. This outcome is linked to more complex management structures and agency problems in larger firms, which hinder the effective utilization of competitive advantages.
The findings suggest that in Iran's competitive markets, optimizing capital structure and strategically leveraging competitive advantages can enhance firms' financial performance. These results provide valuable insights for managers and policymakers to formulate more effective financial and competitive strategies. Furthermore, this study contributes to the existing literature on competition and capital structure in emerging markets by offering empirical evidence from the Iranian context.
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