An Empirical Study On Cost Stickiness And Its Industry Difference

Cost behavior refers to how cost changes when the revenue of the firm changes. The traditional cost behavior model assumes that cost behave symmetrically with activity increases and decreases. It can be showed in the formula as y=ax+b. That means manager’s choice has no effect on the cost. The activity level is the only driver of the cost. However, it is too simple to show the relationship between the cost and revenue in realistic. This article talks about the cost stickiness in our country. The sticky cost behavior contradicts the traditional management accounting model. The definition of cost stickiness illustrates that, when activity increases, cost increases more than it decreases in response to equivalent when activity decreases. It introduces a new tendency of the research on cost stickiness, and states the enlightenment on our country. Meanwhile, the author also analyses the problems in practice and resolves them. It will be beneficial to the reality.There are seven parts in this article. First part is the introduction. The second part talks about what other experts have already done in this field. The third part gives a brief introduction about different theories in this field. The forth part shows what we have done about the data. The fifth part talks about the difference between industries. The sixth part talks about how to eliminate the bad effect of the cost sticky. The last part concludes the article.This paper testifies the existence of cost stickiness using1458observations of Chinese listed companies’fiscal data from2005to2011. Using this sample, we can find these results:(1) There is cost behavior in Chinese listed firms.(2) By comparing the stickiness of total cost, cost of goods sold, and the selling, general and administrative expense, we can get such a conclusion that the stickiness of the selling, general and administrative expense is the highest, the stickiness of total cost is lower, and the stickiness of good sold is the lowest.(3) The level of total cost stickiness becomes lower over a longer accounting period.(4) The data support that cost strictness is affected by the growth rate of GDP.(5) Firm specific impacts on level of the cost stickiness. Debt Asset Ratio will affect the level of the cost stickiness.(6) The level of cost stickiness is also affected by industry characteristics. There is cost stickiness in some industries, bur other industries turn out to have anti-stickiness.There are two innovations in the paper. The paper illustrates the existence of the stickiness of total cost, cost of goods sold, and the selling, general and administrative expense. It also illustrates the relationship and the differences between them. In addition, this paper gives a whole graph of the cost stickiness of11industries. It also talks about the reason and characteristic of each industry.