An Empirical Research On Factors Of Cost Stickiness Behavior

Recent studies in cost behavior find that selling, general and administrative costs and cost ofgood sold are sticky, i.e., costs increase more with activity increases than they decrease in response toequivalent activity decreases. This cost stick phenomemon is against the traditional cost model whichassumes cost increase or decrease equally with the volume of business inereased or deereased.In this article, we had a review over the previous studies about cost sticky phenomemon. Thereare two innovations in this article. First, this study proposed some new explanation about cost stickyphenomemon from incomplete contrat theory and asset specificity theory. Second, we analyzedstructure factors to sticky cost systematically.We find that structure factors of company have some influence on cost sticky phenomemon. Theconclusions are as follows:(1) Costs are sticky. That’s because companies pay the actual or potentialcost for resource adjustments, and business managers give delayed decision.(2) The cost stickness issmaller when the firm’s board size is bigger and the ratio of independence share holder is greater.(3)Equity ownership structure has some influence on cost stick.(4) The cost stickiness is smaller whenthe debt to asset ratio is moderate.(5) The cost stickness is greater when liquid asset ratio is greater.Our carefully research demonstrate that cost stickiness is a neutral phenomenon, we can notsimply evaluate it by advantage and disadvantage.Finally, on the basis of the study above, we proposethe possible future research directions of the sticky cost behaviour.