Research On The Expense Stickiness Of Manufacturing-listed Companies In China

The development level of manufacturing industry represents evaluation criterion of a country’s comprehensive national strength. In other words, the economy can grow rapidly due to the rapid expanse of the manufacturing industry. Statistic has shown that manufacturing is so important that it is becoming the pillar industry of China’s economy, and thereby is drawing increasing attention to its development.Cost management, as we all know, is among the most important activities in the management of manufacturing industry. One important belief of the traditional cost behavior theory is that the marginal changes of cost has no correlation with the trends of business volume while cost itself follows a strict linear relation with business volume. However, modern studies indicate that, in some cases, the marginal decrease when business volume decrease is less than the marginal increase of cost when business volume increases. This asymmetry is always called stickiness by economists, which is always obtained through some observed cost behavior when it is hard to be recorded directly as a specific product or service but is reported in the period it happened. Therefore, it is also called expense stickiness. Just in the last decade, many researchers have verified the existence of expense stickiness through empirical approaches, unfortunately, literature on influence factor is rare.This paper has first introduced recent studies on expense stickiness, then reviewed some concepts and the properties of expense stickiness, summarized the basic theories in details, and finally analyzed the factors that may have influence on expense stickiness,629manufacturing-listed companies are selected as the observation sample, whose financial data between2007and2012are analyzed to verify the existence of expense stickiness, and to discuss the factors that could have an impact on expense stickiness. They are economic area, asset intensity, asset structure, capital structure and rangeability of business volume. The following conclusions are reasonably made with the result of both empirical test and theory analyzation. i: Expense stickiness does exist in the manufacturing-listed companies of China. ii:there are differences in the expense stickiness of companies from different economic area. iii:Companies that have intensifier assets are likely to have higher expense stickiness, iv:Companies that have bigger proportion of non-current assets are likely to have higher expense stickiness. v:Companies that have a larger range of business volume tend to have lower expense stickiness. vi:Companies that have higher asset-liability ratio tend to have higher expense stickiness. In the end, five advices are proposed to decrease the expense stickiness of China’s manufacturing-listed companies based on our research. The advices are to optimized the business environment for the midwest economic area, enhance the asset allocation, have a reasonable management on borrowings, improve the quality of business managers and to form effective internal supervision.