Under the assumption that the degree of market competition and industry concentration have an inverse relationship, this paper conducts an empirical analysis of how industry concentration affects firm value and how industry concentration affects debt ratios, using a sample of 845 non-financial firms (3,380 observations) continuously listed on the Korea Exchange from 2008 to 2011. To verify the propositions, the analysis was performed by dividing markets into highly competitive and less competitive markets based on the Herfindahl-Hirschman Index (HHI), the variable used to measure industry concentration. The empirical results of this study showed that in markets with low industry concentration, concentration had a negative effect on firm value and a positive effect on debt ratios. Conversely, in markets with high industry concentration, concentration had a positive effect on firm value and a negative effect on debt ratios. In other words, the interesting finding was observed that industry concentration has significantly different effects on firm value and debt ratios depending on market conditions. These empirical results suggest that, as argued by Nickell (1996), competition can have a positive impact on firm value depending on market conditions. Furthermore, the results demonstrate the possibility that the existence of an optimal capital structure—which scholars including Castanias (1983) attempted to explain using bankruptcy risk, taxes, and agency costs—may exist in relation to another external factor: the degree of market competition. Additionally, the results can be interpreted as supporting the pecking order theory of Myers and Majluf (1984).