The Non-linear Impacts of Product Market Competition and Profitability on the Debts Ratio, by Consideration the whole Business Environment of Iran in order to Measurement competition

This paper aims to investigate the non-linear relation of debts ratio to product market competition and profitability. Product market competition is measured based on two criteria of market share and market size. Market share indicates the competition on behalf of existing competitors and market size indicates the competition on behalf of potential competitors. The whole business environment and the homogeneousness of production are used to measure these two criteria of product market competition. Earnings before interest and taxes are used in order to measure profitability. The sample consists of 91 firms listed in Tehran Stock Exchange during eight years from 2008 to 2015. To test the hypothesis, the non-linear regression model is used. The results indicate that there is a non-linear, third grade and cubic shape relation between the product market competition criteria (including market share and market size) and debts ratio and there is a non-linear, second grade and U-shape relation between profitability and debts ratio.