Study On Effect Of Office Types To Listed Companies’ Costs Viscous

Cost stickiness, which means that costs increase more when business revenue increases than they decrease in response to equivalent business revenue decreases, as one of the hot research spots focused by scholars, is a general concern of listed companies. The existence of the cost stickiness reduces the accuracy of profits forecast, thus affecting the efficiency of management decision-making and cost controlling, as well as restricting the further development of the enterprise. However, does cost stickiness really exist? What are the factors that affect it? Is it closely associated with the governance mechanism? All the questions stimulate the researches on cost stickiness.It is generally agreed among scholars that cost stickiness is the result of “opportunism idea” of the management. Owing to information asymmetry, the agent chooses to maximize his own interests at the expense of that of the clients, which goes against the client’s willingness. Effective governance, which can be achieved by external audit, is able to solve the problem of information asymmetry to a certain extend. Higher quality of external audit is more effective in monitoring the behavior of the agent and in reducing opportunism possibility, and then plays a restrictive function to cost stickiness. This may be reference to listed companies in seeking to reduce cost stickiness and improve management and operating efficiency through external governance mechanism.According to previous literature, this paper looks into the problem of cost stickiness generated from agency process on the basis of two rights separation. It firstly analyses all the factors that lead to the exist of cost stickiness, then discusses enterprise governance mechanism, such as how external audit mechanism acts in solving potential contradiction and conflict between agent and client and in restricting the emergency of cost stickiness. At last,this paper, in which external audit is divided into three categories, launches empirical analyses,based on the data of non-financial and non-comprehensive A-share listed companies in Shanghai and Shenzhen Stock Market during the period from 2007 to 2014. And various empirical measures are taken in this paper to analyse and demonstrate the following four questions:(1) does cost stickiness really exist in listed companies;(2) the impact of different types of accounting firms on cost stickiness;(3) does it differ a lot of external audit in restraining cost stickiness according to various equity concentration in different listed company;(4) is the effect of external audit(international big four and domestic top ten) on cost stickiness closely related to where it is.Conclusion shows that due to the problem of agency and the opportunism acts of management, the cost of overall listed companies has a downward rigidity, namely“stickiness”. External audit plays a positive role in supervising management behavior, but the effect depends on the category the accounting firm belongs to. For example, the international big four present a higher auditing level and a better restriction effect than domestic top ten and the others. And the restrictive effect of external audit on cost stickiness differs greatly according to equity concentration degree, a better effect when ownership concentration is low.As economy in every area continues to develop, and the difference in economic structure and marketization index decreases, the performance of external audit doesn’t show obvious gap in China’s eastern, central and western regions. Accordingly, from the perspective of perfecting enterprise governance and optimizing ownership structure, this paper offers policy recommendations to listed companies in order to solve the contradiction between both sides and restrict the self-interest acts of management, and finally help companies to progress in a healthy way by gradually rationalizing expense management.