Research On Executive Incentives、External Auditing And Expense Stickiness

Cost management is the focus of business operation management.A scientific and rational cost planning is the key to improve the management efficiency.Especially for the manufacturing industry,cost control is a guarantee for sust AInable development.Therefore,it is essential for enterprises to reduce the cost.Also,how to conduct cost control and make scientific decisions has become one of the focuses for scholars.In traditional cost theory,there is a linear relationship between the level of cost and the size of the business volume,that is,the higher the volume of business,the higher the cost,and vice versa.However,in the real process of operation and management,the change of business volume and the change of cost expense is not always strictly symmetry,which means compared with the degree of cost reduction as the business decreases,the degree of cost increase is probably bigger as the business volume increases.This phenomenon is called cost stickiness.The proposal of cost stickiness has opened up a new direction for academic research.Also,the cost stickiness theory has become popular research field in recent years,but the research on the effects of cost stickiness mainly focuses on the causes,the characteristics of cost stickiness and effects factors of cost stickiness.There are mainly three theories on the causes of cost stickiness,namely,generally recognized costs adjustment,managerial expectations,and agency issues.As an agent,under the circumstance of information asymmetry,enterprise managers may adjust resources and costs with the consideration of self-interest,resulting in asymmetric changes in income and expenses,which is the cost stickiness.Effective external audit and internal incentive systems can to some extent mitigate the costs stickiness.In this paper,with the Anderson(2003)model,descriptive statistical analysis and the correlation analysis of the data of A-share companies of China in manufacturing field from 2014 to 2018 are performed with a starting point of senior executive incentives and external audits.The regression analyses of the existence of cost stickiness,the effect of the salary of senior executives on cost stickiness,the effect of external audits on cost stickiness,and the effect of senior executive-external audits on cost stickiness are separately conducted to observe and analyze whether the results are consistent with the previous research assumptions.Finally,the robustness assumption testing method is employed to rationally interpret the obtained results.The results confirmed that stickiness exists in the fields of the selling expenses and management expenses for listed manufacturing companies of China,and the stickiness is weaker of sales expenses.Monetary compensation of senior executives presents a negative correlation with the stickiness level of sales and management expenses.External audit is also negatively related to the sales expenses and the stickiness of management expenses.Senior executive salary incentives and external audits have a suppressive effect on cost stickiness and have complementary effects.