Research On The Effect Of Earning Management Motivation On Cost Stickiness

Since cost stickiness was proposed the first time, It have got a large number of domestic and foreign scholars to follow and support and it have got a rapid development. Cost stickiness question The Traditional Cost Theory which has been proposed and generally accepted widely. The Traditional Cost Theory holds that the growth rate of cost is not associated with Volume change direction. But the traditional cost theory was built on an ideal state, however the reality is that the cost of decisions disturbed by many factors. Therefore, the traditional economic model maybe can’t explain cost changes in the process of actual operation condition, the finding of cost stickiness verified many scholars guess. I.e., the change of the cost ratio is related with the change of business direction. Cost growth ratio is higher when the volume of business growth then cost down ratio when the volume of business decline.Cost, as an important factor of enterprise competitiveness, in an extremely competitive market, macro-economic downturn today, if companies want to survive, cost control problem is the thorny issue of each company manager must deal with. Control of earnings as important means of operators opportunistic behavior, managers have strong incentives of control of earnings under our existing security policy and economic environment.If control of earnings impact cost stickiness, it shows that the cost stickiness of previous studies containing influence of control of earnings. Therefore, this article start with Earnings management motivation, considering the expenses stickiness and total cost stickiness, we testing viscous effects to expenses stickiness and total cost stickiness of three Earnings management motivation i.e. Loss, Small profit, Big bath. As to the theoretical basis, the article increase enterprise inertia theory except contract theory, based on Previous studies. Thereby explain cost stickiness better.In this paper, we got the different effects of different earnings management motivation on the cost stickiness through empirical study. So we can find some rule of cost changes, and provide a certain value for the cost decision of managers. In the aspect of theory, the article enriched empirical study of cost stickiness and control of earnings, let us have a more comprehensive understanding of control of earnings. In the aspect of practical significance, not only reveals the variation of the cost to help the managers to make reasonable and accurate decision-making costs, but also provides clues and directions for the owner’s supervision of managers, improve the accuracy and the scientific nature of cost analysis, earnings forecast, and company value evaluation.In order to arrange research content more reasonable, the paper is divided into six chapters: Introduction, literature review, theoretical analysis and assumptions, research design, conclusion and prospect. The research method adopts normative research and empirical research, There are both solid theoretical support and detailed empirical evidence. Through empirical test of listed companies data from 2009 to 2014 get the following conclusion: First, there is general expenses stickiness and total cost stickiness in our country. And SG&A stickiness is significantly higher than the total cost stickiness. Therefore, the surplus control mainly through expenses control. Besides that, compared to the cost stickiness of the other scholars using the data before 2007, the viscosity decreased; Second, Losses and Small profit motive have a significant weakening effect to the total cost stickiness and expenses stickiness. Big bath motivation is enhanced the total cost stickiness and SG&A stickiness. So the three motives have the same effects to the total cost stickiness and to SG&A stickiness.This paper has the following contributions and innovations. Firstly, we increase enterprise inertia theory except contract theory, Thereby explain cost stickiness better. Secondly, Breakthroughs in the past only considered expenses stickiness or Operating cost stickiness, in this paper, the cost stickiness will be divided to total cost stickiness and SG&A stickiness and we compared to study of their existence and different influence of earnings management motivations for them. Finally, previous research on the effects of earnings management on stickiness mostly from the perspective of accrued earnings management or real earnings management research.This article from three common earnings management motivation perspective study the effects of earnings management on total cost stickiness and SG&A stickiness.