Empirical Study On The Influence Of Corporate Internal Governance To The Cost Stickiness

Reducing the cost of enterprises, enhancing the competitive advantages of enterprises, and promoting economic restructuring is one of the five tasks of Supply-Side Reform. Under the background of the increasing costpressure and poor demand, enterprises are facing the challenge of narrowing the profit space. The source of the high cost of enterprises is the lack of cost control. Therefore, improving the cost management and reasonably controlling the level of cost become the key issues that enterprises need to pay attention to. The study of Cost Stickiness provides a theoretical basis for enterprises to correctly grasp the law of cost changes,improve the efficiency of resource utilization and cost decision-making, and thus enhance profitability and competitiveness.Cost Stickiness means that when the volume of business increases or decreases at the same rate, the increase in cost is greater than the drop in cost, and the main form of cost stickiness is the abnormal increase of cost. Agency problem is an important reason for Cost Stickiness. Management seeks to maximize the effectiveness of individuals through excessive expansion of the size of enterprises, increasing their salary level,and increasing on-the-job consumption and controllable resources. These lead to abnormal increase in cost. As a result, the cost deviates from the optimal level of resource allocation,exacerbating the degree of cost stickiness. As an effective way to alleviate the agency problem,internal governance can effectively restrain the selfish behavior of management, and thus reduce the degree of Cost Stickiness. Therefore, it is of great significance to explore the impact of corporate internal governance on cost stickiness.The research object of this paper is Total Cost Stickiness, Operating Cost Stickiness and Expenses Stickiness. On the basis of analyzing the three kinds of Cost Stickiness of manufacturing listed companies and their subdivision industries, explore the impact of corporate internal governance on the three types of cost stickiness. This article selects the listed manufacturing companies as samples in both Shanghai and Shenzhen main stock exchange market between 2012 and 2015. Models are developed o examine the existence of three types of Cost Stickiness and the impact of internal governance on the three types of Cost Stickiness.Empirical analysis is used to draw relevant conclusions.The results show that there are three types of Cost Stickiness in manufacturing listed companies and most of their subdivision industries.The stickiness of expenses is greater than the stickiness of operating costs and total costs. Characteristics of the board of directors,ownership structure and management incentive have different effects on the three types of Cost Stickiness. The fine corporate internal governance has a more significant effect on Expenses Stickiness. In order to strengthen the effectiveness of the internal governance mechanism,alleviate the agency problem between management and shareholders, and restrain the Cost Stickiness caused by the management self-interest, this paper puts forward suggestions to strengthen the board governance, improve equity structure and strengthen the management equity incentive. These have some practical significances in improving the effectiveness of the company’s cost decisions, reducing costs reasonably, and improving business performance. At the same time, they broaden the channels for other stakeholders to evaluate the management level of the company, analyze management motivation and forecast corporate performance reasonably.