Research On The Earnings Management On Cost Stickiness

Under the momentum of rapid economic development,the development of information technology enterprises faces greater competition pressure.In order to gain more revenue,those enterprises have to adapt themselves to the new marketing environment through changing business operations and offering better services,which could also help them obtain more market share.From the analysis of the enterprises themselves,in order to gain profits and seek advancement,the management and the control of prime costs have become a pivotal problem for them.The continuously rising status of the information technology industry in our country directly and profoundly impacts the adaptation and optimization of the economic growth as well as the industrial structure,the improvement of technology education,the social progress,and the increase of the country's overall national strength.The number of listed information technology enterprises is growing year by year and those enterprises have become one of the pillars in China' economic development.This paper studies the stickiness of information technology listed companies.This paper analyzes some fundamental theories,such as the Incomplete Contract Theory,the Agency theory and the Asset Specificity Theory,conducts empirical research on the relationship between earnings management and cost stickiness of the enterprises,followed by the analysis of the influences of enterprise cost stickiness on the accrued earnings management and real earnings management before utilizing free cash flow as the regulatory variable to probe the relationships between the three.Then,through the establishment of models and proposal of hypotheses with necessary tests,the paper eventually draws the corresponding conclusion meanwhile providing advice for enterprises of how to adjust enterprise cost stickiness with the summary of the limitations in this study.Through empirical research,the following conclusions can be drawn: First,Chinese information technology industry does exist cost stickiness;Second,earnings management has significant impacts on the cost stickiness of the information technology enterprises;Positive accrued earnings management will reduce cost stickiness while negative accrued earnings management will increase cost stickiness.Real earnings management,to some extent,reduces cost stickiness of the enterprises;Third,using free cash flow as the regulatory variable will have more influence of earnings management on the cost stickiness.In the previous studies,scholars mostly researched the relationship between earnings management and cost stickiness only.Nevertheless,there is a certain relationship between free cash flow and earnings management as well.Hence,based on the original model,thispaper adds free cash flow as another factor,further studies the relationships between the three in the information technology industry.Furthermore,this paper proposes to reduce the impact of earnings management on the cost stickiness by reducing free cash flow.