The Intertemporal Impact Of Cost Stickiness On Firm Value

Anderson et al.(2003)referred to the phenomenon as "cost stickiness" that "cost increases more when sales increase than it decreases when sales decrease in the same proportion".In other words,the enterprise cost has the downward rigidity characteristic,namely easy to increase but difficulty to decrease.Since then,numerous studies have examined the existence and influencing factors of cost stickiness from different angles,but most of the literature are inherently assumes that cost stickiness is bad for companies,and try to explore the measures of reducing cost stickiness form various angles,and found that internal and external governance mechanism,such as board independence,institutional investors,equity incentive,media attention,external audit,listed abroad and so on,can reduce the cost stickiness of enterprises.Howe-ver,cost stickiness that seems to be detrimental to the company's value is widely exist in different countries,different industries and different cost items.Obviously,this is contrary to the profit-pursuit nature of enterprises,and raises the question that whether the existence of cost stickiness reflects "low efficiency of enterprise resource utilization and inadequate cost management" or holds a potential benefit for enterprises?Based on the above,this article use all non-financial A-share listed companies from 2003 to 2016 as the sample,examining the impact of cost stickiness to firm value in both short-term and long-term,so that verifying the economic retionalization of cost stickiness.Specifically,this paper examines the following propositions:First,does cost stickiness has a intertemporal heterogeneous effect to firm value,that is to say,does cost stickiness has difference impacts on firm value from the short-term and long-run?Second,is the impact of cost stickiness on the short-term and long-term firm value affected by other factors?To this,this paper identifies three possible factors(adjustment cost,manegers' anticipation and agency problem)which affect the relationship between cost stickiness and corporate value,and then conducting grouping test regression.Third,considering the special institutional background of China,this paper exams the impact of enterprise's ownership on the relationship between cost stickiness and corporate value.Finally,whether different cost stickiness levels have different impact on firm value?For this,the paper carried out spline regression based on the quantile grouping.This study found that:(1)Cost stickiness could damage firm value in the short term;but would increase the firm value in the long run,namely,cost stickiness has inter-temporal and heterogeneity effects on firm value.The conclusion is still established after considering endogenous problems.It verifies the economic rationalization of cost stickiness.(2)Cross section test found that the intertemporal heterogeneous effect of cost stickiness on firm value is mainly manifested in such enterprises with higher cost adjustment,optimistic expectation and lower agent cost.(3)Further analysis found that the intertemporal heterogeneous effect of cost stickiness on firm value only manifest in the non-state enterprises.(4)The spline regression results show that,facing with sales falling,too quickly adjustment to resources allocation(presents cost stickiness)can damage firm value,and different levels of cost stickiness has heterogeneity effects on corporate value,only keep modest cost stickiness can increase firm value in the long term.This paper is not only benefit to interpret the economic connotation of the cost stickiness correctly,but also provides a theoretical reference for companies' cost management.