Research On The Relationship Between Cost Stickiness And Earnings Smoothing

Cost management and earnings management are important issues in the theoretical research of management accounting and financial accounting respectively,which have an important impact on achieving the goal of internal business management and meeting the requirements of external stakeholders.Cost stickiness reflects a company's cost behavior.Earnings smoothing is one of the ways of earnings management in most listed companies.Both of them affect the operational efficiency and long-term development of enterprises.This paper studies the relationship between cost stickiness and earnings smoothing,which will help to understand managers' cost management behavior and earnings management behavior,and has important practical significance for optimizing the efficiency of enterprise resource allocation and improving the quality of earnings information.This paper applies principal-agent theory and information asymmetry theory to analyze the motivation and possibility of the existence of cost stickiness and earnings smoothing,and the relationship between cost stickiness and earnings smoothing.It also applies corporate governance theory to analyze the impact of external audit quality on the relationship between cost stickiness and earnings smoothing.The analysis finds that cost stickiness and earnings smoothing show a trend of reverse change.Managers' opportunistic motivation is the key factor leading to the negative correlation between cost stickiness and earnings smoothing.According to the theory of corporate governance,as a mechanism of social checks and balances,external audit can effectively alleviate the principal-agent problem of enterprises and reduce information asymmetry,thus weakening the negative correlation between cost stickiness and earnings smoothing.On this basis,this paper chooses A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2003 to 2017 as research samples,and uses multiple linear regression method to empirically test the relationship between cost stickiness and earnings smoothing.The research results show that when the company's performance decline,if managers choose to keep idle resources in order to maintain the resources under their own control and obtain personal utility,the increase of cost stickiness will also lead to substantial fluctuations in corporate earnings,which will result in a negative correlation between cost stickiness and earnings smoothing.Using the model of Lang et al.(2012)for reference,this paper distinguishes the information attribute and opportunistic attributeof earnings smoothing,and finds that the negative correlation between cost stickiness and opportunistic attribute of earnings smoothing is more significant than information attribute of earnings smoothing,which indicates that managers' opportunistic motivation has an important impact on their cost management behavior and earnings management behavior.The study also finds that the negative correlation between cost stickiness and earnings smoothing is weakened in firms with higher external audit quality,mainly because high-quality external audit can effectively monitor and restrain managers' opportunistic behavior.Finally,according to the above conclusions,this paper suggests that investors should strengthen their ability to identify self-interested behaviors of managers and the market should improve the external governance mechanism of the company.This paper expands the research scope of cost stickiness economic consequences and earnings smoothing influencing factors,provides a new way to understand the cost management behavior and earnings management behavior,and provides empirical evidence for optimizing the external governance environment of enterprises,improving the efficiency of resource allocation and the quality of earnings information.