Research On The Influence Of Corporate Strategy On Cost Stickiness

In 2003,Anderson,Banker,and Janakiraman’s ground-breaking research of firm cost stickiness provided an important path to reveal the secrets in the "black box"-enterprise cost management practices.Although there are doubts on this research,it still has attracted the attention of scholars and followers.So far,numerous in-depth studies have been done and the research topics can be summarized as follows:(1)the cost stickiness is extended to cost stickiness,and respectively study the sticky problem of operating costs,selling expenses,administrative expenses,deep into the effects of various differences of the Cost Stickiness;(2)comparatively study the cost stickiness among countries and regions,industry characteristics and different property;(3)review the effects of earnings management on cost stickiness;(4)associate the macroeconomic policy to the cost stickiness,which influences the degree of cost stickiness;(5)based on the principal-agent theory,discuss how to restrain the negative cost cost stickiness from the perspective of corporate governance effectively;(6)research on cost stickiness economic consequences from the perspective of cost behaviour,trying to reveal the information content of the accounting surplus.According to the recent research on the cost stickiness phenomenon and its causes,the main reason for the formation of cost stickiness includes cost stickiness adjustment(adjustment costs),cost manager’s optimistic expectations(optimism)and agency problem(agency costs)(Banker et al.,2010).However,different strategies chosen by different enterprises may lead to the difference between adjustment cost and agency problem,and then would lead to different effects on the cost stickiness of enterprises.Studying the relationship between corporate strategy and cost stickiness has high practical value more than just theoretical value.The difference of enterprise strategies usually lead to the discrepancies in enterprise goal,profit model,organization structure and cost structure.Miles et al.(1978)subdivides the company’s strategic type into three types based on the rate of renewal of the enterprise’s products and markets:defensive,offensive and wait-and-see.Among them,the offensive strategy is considered into the differentiation strategy.In order to achieve this strategic goal,the enterprise generally has a number of specialized characteristics of strong specific assets.When the adjustment cost becomes higher while the volume of business declines,the management board may intend to give up the cost adjustment decision considering the internal disposal of special resources will incur the greater opportunity cost,which is expected to result in the cost stickiness.Defensive strategy is commonly considered as the cost leadership strategy.The successful cost leadership strategy is to reduce the total cost of enterprises and gain competitive advantage.Hence,when a company has a decrease in sales revenue,it will adjust the cost quickly,so that enterprises can maintain a lower cost structure and adjustment cost.Therefore,the enterprise strategy may profoundly affect the adjustment cost of the enterprise and then influences the stickiness of the enterprise cost,which has been studied at present.However,it is worth noting that the degree of information asymmetry and the degree of asymmetric interest between shareholders and management will be different because of diverse corporate strategies.This difference may even affect the direction and adjustment of cost and cost adjustment of enterprises.Specifically,compared with the offensive enterprises,the degree of asymmetry will become stronger in attacking shareholders and management as well as the degree of information asymmetry and interests asymmetry,problem of insufficient incentive exists in management to a certain extent,management tend to reap rewards for themselves through other ways,but the internal control mechanism of enterprises under offensive strategy scatters and changes frequently,so the self-interest behaviour of the management cannot be restricted effectively(Wang Huacheng,2016).Therefore,the management has the ability to seize the private benefits by increasing the"stickiness" state of the cost,making the enterprise agency problem more prominent.But now,the research on "enterprise strategy-agency cost-Cost Stickiness" is still to be studied.To sum up,the research on enterprise strategy and Cost Stickiness has generally held that,due to the reason that the adjustment cost of specialized assets is considered by management,the more aggressive the business strategy is,the higher the cost of business sticky will be.However,the enterprise strategy is different.Its agency costs will be different as well,and may also have an impact on the stickiness of the cost.Previous scholars did not conduct research based on clue that cost stickiness influences the corporate strategy through agency cost.They also seldom indicated the specific path that how enterprise strategy affects the cost stickiness and whether there is a certain situation dependence problem in this line.The paper’s concerns are thus created:does the enterprise strategy lead to the difference in the cost stickiness of the enterprise due to its diverse agency costs?How does the enterprise strategy affect the specific path of cost stickiness?Does the enterprise strategy depend on a certain situation variable through the agency cost and then have the impact of the cost stickiness?First,the general objective of this research is to establish the relationship between corporate strategy and cost stickiness.This research carries out the mechanism of intermediary costs to test the influence of corporate strategy on cost stickiness and measures the influence path of corporate strategy on cost stickiness by using the endogenous mechanism.Because the enterprise strategy selection and implementation will be affected by resource capacity,management characteristics as well as the influence and restriction of the environment,there will also be the situational variables.Further,the paper considers whether the strategy of enterprise strategy can affect the cost stickiness through agency cost has a certain situation dependence,the second part of the empirical research from influence of enterprise strategy implementation capability of enterprise resource level,management level and external environment,specific detection.The specific contents include:from the enterprise resources and ability level point of view,because the cash resources in the resource system and the enterprises in the important and special status,it will explore the "enterprise strategy-agency cost-cost stickiness"whether the path has context dependency on corporate cash holdings or not;from the perspective of enterprise management level,it will detect "enterprise strategic-agency cost-the cost stickiness" whether the path has context dependency on enterprise management characteristic or not,analysis of the paper is carried from two aspects of executive power and executive ability;from the enterprise external environment,it will probe "enterprise strategy-detection agency cost-the cost stickiness" whether the path has context dependency on the characteristics of the external environment or not.Through theoretical analysis and empirical test,this paper found that the implement ion of different strategies will lead to dissimilar agent cost and the differences in cost stickiness;The realization of the path of "enterprise strategy-agency cost-cost stickiness" will depend on the internal resources holdings,the management of certain characteristics,the support of high management power and ability,as well as the situation with higher ’uncertainty.Therefore,via the discussion of the points situation of the main logic,it is found that in the enterprise which implements offensive strategies,adequate cash holdings,higher executive power and the uncertainty of the external environment of higher will increase the agency cost of enterprises so that the positive relationship will be more significant between strategic radicalization of enterprises and cost stickiness;Actually,executive ability is a "double-edged sword".For these enterprises adopting offensive strategies,performance will inhibit the cost stickiness caused by low-qualified administrative ability,and aggravate the stickiness cost brought by agency costs.In this situation,the strategic radicalization is not significantly associated with the cost stickiness.The main innovations of this paper are as follows:(1)Measures the influence path of corporate strategy on cost stickiness.The theory of strategic cost management shows that different strategies are actually the result of managers’ decisions,which will have a profound impact on the cost and expenses of enterprises.The existing research on enterprise strategy and cost stickiness generally believes that the more radical enterprise strategy is,the higher the enterprise cost stickiness due to the adjustment of the cost.But different enterprise strategies will cause differences in agency costs,and may also have an impact on the stickiness of the cost.However,the existing research did not do the research on the clue which enterprise strategies affect the cost stickiness through the agency costs,and meanwhile they did not test the specific path of the impact of enterprise strategies on the cost stickiness,nor did they examine the endogeneity problem between the enterprise strategies and the cost stickiness.Therefore,this paper choices a proposition from the perspective of"intermediary effect of agency costs" and seek to find out how agency cost will impact competitive strategies and the cost stickiness with action mode and how enterprise strategies influence the cost stickiness.In order to enrich the theory of cost stickiness and enterprise strategies,the endogenous test is adopted to exanimate the relationship between enterprise strategies and the cost stickiness.It also attempts to make a beneficial supplement for the traditional cost behaviour theory and expand the application field of enterprise strategies in the accounting research.(2)The innovative research on the exploration of the situation on which the main logic of the paper is dependent.The existing research simply focuses on the relationship between enterprise strategies and the cost stickiness,but this paper not only explores the problem transferred by the line that "enterprise strategies-agency cost-cost stickiness",but also observes that the selection and implementation of enterprise strategies will be affected and restricted by the ability of enterprise resources,management characteristics and the external environment,therefore this paper also considers whether there exists certain situation dependency in the main logic of "enterprise strategies-agency cost-cost stickiness",and does the corresponding detection and inspection.This paper discusses whether there exists situation dependency for "enterprise strategies-agency cost-cost stickiness" this path on corporate cash holding status,management characteristics and the external environment,this paper not only enriches relative literature in the cash holdings,executive power,executive ability and environmental uncertainty,but also provides a beneficial complement for the current research content of the relationship between enterprise strategies and cost stickiness,has a more profound understanding of the cost stickiness caused by the agency cost.On the theoretical level,based on strategic theory and financial theory,the paper further explores the influence of the path of enterprise strategies on cost stickiness,taking agency cost as an intermediary variable,and further enriches the existing literature on factors influencing cost stickiness.And it also expands the application field of the company strategies in the accounting research,linking the enterprise strategy with the enterprise cost management behaviour.The detection and inspection of the problem that whether there exists situation dependency in the main logic,also enriches further research in cash holdings,executive power,executive ability and environmental uncertainty and other aspects,and theoretically provides clues and ideas to restrain the corporate cost stickiness caused by.From the view of practical value,affected by the development of domestic and international economy,enterprises in our country are facing the pressure brought by extremely severe market environment as well as production and operation.Besides,generally high agency costs have seriously affected the natural increase or decrease of the cost,resulting in a more serious "stickiness" of the enterprise cost.In fact,the "cost stickiness" is a neutral word.Cost stickiness is the rational and expected decision of management if it is caused by adjustment cost,so it is no malice;but if the cost stickiness caused by agency cost,it may damage corporate value and encroach on shareholders’ rights and interests.From the perspective of agency cost,this paper examines the relationship between enterprise strategies and cost stickiness.It is considered that different strategies of enterprises will have different effects on cost stickiness due to the difference of agency cost,and this path will depend on certain situations.Therefore,examining the cost stickiness from the outside,the enterprise can take into account about strategic types implemented,the enterprise resource capacity which has impact on strategic choice and implementation,management characteristics and environmental factors.In this way,the paper can do more in-depth analysis in the cause of corporate cost stickiness phenomenon,it also has a definite object in view in guiding and controlling rational management behaviour,which provides practical reference to constructing of corporate governance reasonably and promoting the effective implementation of cost management mechanism.