Research On The Relationship Of Diversification And Cost Stickiness

Cost stickiness refers to costs increase more rapidly as demand increase than decline as demand decrease,which is called asymmetric change of costs.This phenomenon presents a challenge to the traditional model of cost and makes the topic of cost stickiness one of the hottest research questions in the field of management accounting in recent years.Existing research shows that the drivers of cost stickiness include contractual costs,efficiency and opportunism,and the interaction of these three factors lead to cost stickiness.The view of opportunism can explain most situations of cost stickiness,which mainstream view in western countries.Studies have confirmed that managers'motivation of empire building has a positive effect on cost stickiness(Chen et al.,2010),which is referenced by many related researches.Jesen(1986)argued that managers would 'build empire by diversification to get private benefits.Therefore,diversification could be an important factor of cost stickiness.This paper uses the data of A-share listed companies of China from 2012 to 2015 to research the relationship between diversification and cost stickiness,and further investigate how asset-light strategy influence the relationship between diversification and cost stickiness.We uses empirical method to research on the following three questions:(1)The existence of cost stickiness in Chinese listed companies;(2)The relationship between diversification and cost stickiness.(3)How asset-light strategy influence the relationship between diversification and cost stickiness.Our results show that:(1)There is cost stickiness in A-share listed companies of China;(2)Diversification has a significant positive impact on cost stickiness,and cost stickiness increases when the degree of diversification is higher,and all three indexes of diversification we used lead to the same results.Further,we find this phenomenon is more significant in companies with larger scale,weaker governance and in manufacturing companies;(3)Under the asset-light strategy,the relationship between diversification and cost stickiness become insignificant.The results indicate that diversification raises higher requirements on companies' capabilities of resource allocation,and companies could transform their strategy from asset-heavy into asset-light to improve the efficiency of resources allocation.