Ultimate Controller, The Largest Shareholder Control And The Cost Stickiness Differences

The traditional cost behavior model assumes that there is a linear function relationship in the changes between the cost and volume of business, that is, the change ratio of cost and volume of business is in proportion. However, the existing scholars studies find that the cost behavior model is too simplistic and contrary to the actual business activities. It does not always exist linear relation between costs and volume of business. During the increase of revenue the magnitude of the increase in the volume of business will be much higher than the rate of decline in business cost reduction, that is to say, cost stickiness. The study of this issue lets us re-examine the concept of the existing cost management and cost control, and analyzes deeply that how the cost stickiness affects the company’s performance. Based on this, combined with state-owned enterprise reform, we will analyze differences of cost stickiness between state-owned enterprises and private enterprises from the perspective of the ultimate controller, then, try to seek the causes of the differences from large share-holders, and at last in the article, we will make some suggestions to corporate governance of state-owned enterprises.Ideas of this study are as follows:The first chapter is the introduction that introduces the background of this study, the significance of the topic (theoretical significance and practical value), literature review, research contents and methods, and the main contribution of this paper; The second chapter is the theoretical basis and assumptions described, mainly from two aspects of agency theory and property rights theory, in turn we will raise four assumptions:the existence of cost stickiness; differences of the cost stickiness between state-owned enterprises and private enterprises;the causes of differences assumptions (including the largest shareholder control, other equity balance two aspects); The third chapter is the study design, and this chapter introduces the variables design, sample source and selection, and models for the preceding assumptions; The fourth chapter is the test part of the empirical results, through multiple linear regression from the ultimate controlling party point of view, we will confirm the relationship between shareholder control and the differences of the cost stickiness; The fifth chapter includes conclusions and recommendations,which summarize the findings of this article, and make policy recommendations for the corporate governance of state-owned enterprises, at last in the article we specify the limitations of this study and follow-up research.This paper selects the Shanghai and Shenzhen A shares of state-owned enterprises and private enterprises in2008-2010as the empirical data, and finds that:(1) listed companies in China(both state-owned and private enterprises) exist costs stickiness behavior, and expense stickiness comes mainly from management fees;(2) compared with private enterprises, state-owned enterprises exist more higher cost stickiness, while the sales fees stickiness is not always significant;(3) as for the causes, the state-owned controlling shareholder stake affects the cost stickiness positively, while private enterprises controlling shareholder affects negatively; balances of other shareholders, to a significant extent, suppress the cost stickiness no matter what different nature of property rights.The main contributions of this paper are as follows:(1) Combined with property rights theory, we assume different nature of property right will lead to the different actions, at last, which will affect the operating performance of the enterprise;(2) This paper attempts to find in the view of ultimate control, the state-owned enterprises and private enterprises exist different cost stickiness and we try to utilize the second agent theory such as large shareholders controlling, property rights theory to explain the causes of differences. There is no doubt that we combine the second agent theory such as large shareholders controlling, property rights theory and the cost stickiness perfectly.Of course, there is a little short-comings, for example:the small time span of the selected sample in this article, to some extent it will affect the reliability of the conclusions of the study, even though, we still have reasons to believe that this article will address China’s state-owned listed companies to some extent.