Relationship Between Cost Stickiness And Enterprise Performance

As the traditional cost behavior theory, which holds a linear relationship betweencosts and revenues been questioned, it has become one of the hotspots of accountingprofession in recent years to study the cost behavior of non-linear relationshipbetween period costs and business volume.Previous studies showed that the extent of marginal cost reduction while theenterprise business volume decreased was less than that of the marginal cost increasewhile the enterprises business volume increased an equal amount. The phenomenathat the change rate of marginal cost is somewhat influenced by the change directionof business volume is called cost stickiness. The cost stickiness has become a bondbetween the interactions of management accounting and financial accounting. InChina, the cost stickiness research started relatively late. In addition to basic researchon the cost of sticky issues, the economic consequences research of cost stickiness isstill relatively small. Therefore, enhancing the research of cost stickiness to firmperformance can not only better reveal the cost changing rules, but also enrich thestudy of economic consequences of cost stickiness, which providing a reference for toenterprises to control cost stickiness to achieve the purpose of promoting corporateperformance. All these research are of important theoretical and practical significance.Starting from the study status quo of the costs stickiness, the article supports theview that cost stickiness is generated from three combined reasons, namely "adjustedcosts concept","efficiency concept" and "opportunistic outlook ", and holds thatadjusted costs, contract incompleteness and managers’ self-interested behaviorinfluence cost stickiness. After designing from the research hypothesis, modelbuilding, variable definitions and data filtering, this study verifies the existence of thecost stickiness among China’s listed companies and empirical tests the relationshipbetween enterprise performance and cost stickiness based on the2008-2012businessdata of962listed manufacturing companies from Shanghai and Shenzhen A shares.The results show the following two discoveries. Firstly, the results show that coststickiness widely presents in China’s listed manufacturing companies. The rate of costrose when operating income increased is greater than cost declined when incomedecreased. Secondly, the impact of cost stickiness on business performance showed anN-type distribution. The impact of cost stickiness to firm performance differs from cost stickiness levels. When cost stickiness is too high or too low, costs stickiness isnegatively correlated with corporate performance, which means that cost stickinesspresents inhibition on business performance. When the cost stickiness is on anappropriate level, it can promote enterprise performance to some extent. Accordingly,suggests on how to improve enterprise cost management level and controlling coststickiness are provided based on the external environment and internal corporategovernance, which can help to take better advantage of changing laws of cost, achievescientific decision-making of costs, and improve business performance in the end.