A Study Of The Influence Of Managerial Expectations On Cost Stickiness

According to the traditional theory of cost behavior, the relation between costs and volume is symmetric for volume increases and decreases. The marginal changes of the cost are the same to the marginal changes in volume. However, some scholars begin to doubt the traditional theory since the 1990s. In 2003, Anderson, Banker and Janakiraman found, for 7,629 firms over 20 years from 1979 to 1998, that the magnitude of the increase in selling, general, and administrative costs associated with an increase in volume was greater than the magnitude of the decrease in costs associated with an equivalent decrease in volume. Since then, they put forward a new research direction—cost stickiness. Cost stickiness, an asymmetric behavior of costs, which refers to costs increase more when activity rises than they decrease when activity falls by an equivalent amount. Based on the analysis of the existing literature, the research conclusion on cost stickiness for foreign scholars for is relatively mature, the conclusion is the same. However, domestic scholars study is not consistent. Especially about the selection to the variables of cost and the influence between managerial expectations and cost stickiness for the listed companies in China.This paper introduces the research background, research significance and the literature review at home and abroad first. Then propose the related concepts and develop the hypotheses of this paper based on "Bounded Rationality Theory", "Managerial Optimism", and "Agency Theory". This paper study the differences between different types of cost stickiness and the influence between managerial expectations and cost stickiness based on the total costs (the sum of the operating costs and the sales expenses and administrative costs), the operating costs, the sales expenses and administrative costs. The conclusion of the paper is that:1) The total costs, the operating costs, the sales expenses and administrative costs are sticky in the listed companies in China.2) The degree of stickiness for the total costs is the minimum; the degree of stickiness for the operating costs is the medium; and the degree of stickiness for the sales expenses and administrative costs is the maximum.3) Conditional on a prior sales increase (managerial optimistic expectations), costs in the current period exhibit stickiness.4) Conditional on a prior sales decrease (managerial pessimistic expectations), different types of cost presents different cost behavior. However, all of them did not through the test of significance. In statistical, it cannot prove the existence of cost stickiness, and also cannot prove the existence of cost anti-stickiness.5) On the premise of managerial optimistic expectations, the degree of stickiness for the total costs is the minimum; the degree of stickiness for the operating costs is the medium; and the degree of stickiness for the sales expenses and administrative costs is the maximum. And the degree of all types of the cost stickiness is greater than the conclusions for the existence model.