Study On Managers’ Earning Targets 、the Stability Of Market Demand Level And Sticky Costs

This study explores how managers’deliberate decisions induce sticky costs. Firstly, we examine asymmetric costs resulting from current resource adjustments made intentionally to meet earnings target. Secondly, we explore the sticky costs impact of resource adjustments made by the managers depending on the stability of market demand level. Findings indicate that costs exhibit slighter stickiness in the presence of managers’driving force to meet earnings target. While the enterprises has been in a stable market demand environment, when the current operating revenues falls, because of poor information and the motivation of loss aversion, the managers will not implement the resources cut decisions, thus increase the degree of sticky costs. Lastly, we examine the reciprocal effect of two influence factors mentioned above. Findings indicate that resource adjustments made intentionally to meet earnings targets wash away, rather than induce, cost stickiness imposed by the stability of market demand level, resulting in symmetric costs. The findings suggest that some deliberate decisions induce sticky costs while other deliberate decisions diminish sticky costs depending on the underlying motivation. The results of the study further improve the basis of the related theory of cost stickiness, and also provide a certain practical significance for enterprises to strengthen cost management and improve the enterprises performance.