Research On Cost Stickiness Based On The Agency Theory

The traditional Cost Behavior Theory assume that there is a linear relationshipbetween cost and business activity, but Anderson et al.（2003）found evidence of‘stickiness’in selling，general and administrative cost by empirical research (i.e.，SG&A costs increase more when activity rises than decrease when they falls).After allthese, more extensive researches on cost stickiness are conducted by relevantscholars at home and abroad, through which they analysis some economic factorsleading to this phenomenon. Based on this background, we draw on the AgencyTheory to make an empirical reaearch to find that cost stickiness is greatly influencedby opportunism behaviors and motivation of the manager, besides those economicfactors.This paper firstly reviews foreign and domestic relevant studies of cost stickinessand corporate governance, and then selects data samples of Chinese listedmanufacturing company in2007-2010, using Agency Theory to search for theevidence of cost stickiness, as well as its characters and influencing factors, fromthe perspective of corporate governance.The results suggest that:(1) there is a positive association between managers’opportunism behaviors and the degree of cost stickiness;(2) there is a negativeassociation between the strength of corporate governance and the degree of coststickiness, and this negative association is stronger in firm-years with a greateropportunism behaviors problem. Our finding also prove that opportunism behaviorsof the manage has a great effect on cost stickiness, and that corporate governancereduces cost stickiness by preventing self-interested managers from over-spending oncosts.So far, almost all studies are only confined to the theoretical analysis of existenceand reasons of this problem. We initially conduct a empirical analysis, using a greatdata sample to find the influence of manager’s opportunism behaviors on cost stickiness. Besides, our study puts forward a new direction of research on actionmechanism of Angecy Theory. Our findings also suggest that the OpportunisticBehavior problem provides an additional explanation for cost stickiness, Also somecontribution for the ongoing debate of whether corporate governance could reduceAngecy problems is realized.