Self-benefit Motivation Of Management And Expense Sticiness

Cost behavior refers to how costs change when there is a change in an organization’s level of activity in management accounting. We often assume that the cost behavior is linear in traditional view.However, as simple as we know, the linear cost behavior deviates from the organization’s actual condition.Current studies about cost behavior presents cost increases more with income increases than it decreases with equal income decreases. The cost is sticky, which is contradict to the traditional model, it also rises a popular issue in our accounting research field. Whether the expense stickiness is really widespread among our country? What kind of level does the stickiness keep in Chinese firms? Does the management of the company deliberately make the expense stickier? And what factors is expense stickiness influenced by? All the questions prompt us to make further exploration to expense stickiness which helps to reveal the "black box" of the company cost management behavior.Currently, the prevailing interpretation of expense stickiness is based on the theory of opportunism. Most of domestic researchers exploring opportunism causes, only choose Free Cash Flow as a variable, but not study the more relationship between agent problem and expense stickiness. So what is the purpose prompted managers to make subjective behavioral decision and lead to expense stickiness? Therefore, the paper takes the perspective of self-benefit behavior of management, and will do in-depth research about expense sticky of the manufacturing public companies in our country. So it will be of great significance to rich accounting theory research and improve the efficiency of expense management.The paper has5parts which proceed as follows:Part I elaborates the background of the study and what is the significance of the paper, describes the brief contents and research methods of my study, and also provides the possible innovations to accounting field. Part II reviews extent literature about cost stickiness in and abroad. And summarize the literatures about agency causes of expense stickiness. Part III is theoretical building blocks, it talks about the famous "Transaction Cost Theory, Agency Theory, Incomplete Contract Theory" we know, and analyzes the expense sticky in view of agency problem. At last in the part we develop the hypotheses of this research. Part IV comes about the empirical research. Firstly, choose the ABJ(2003) model about cost stickiness,define variables and select sample statistics. Secondly, analyze the choosed datas’descriptive statistical results of certain listed firms with SPSS. Thirdly, the paper verifies the hypothesis using regression analysis. Part V gives a summary to the results and provides several policy implications, at last talks about the limitations of the research.Using data for manufacturing listed companies in A-share stock of Shanghai and Shenzhen over a period from2008to2012in China,we find:(1)Expense sticky really exists in these manufacturing public companies of China.(2)Expense stickiness is really positively associated with free cash flow, presenting that the agency problem finally gives out an obvious account for why the expense is sticky.(3) Expense stickiness is negatively associated with managers’fixed pay, which also provides explanation for expense stickiness from agency problem perspective.The major innovations are:(1) We not only explore the positively contact between expense stickiness and Free Cash Flow in public firms, but also find the negatively relationship between expense stickiness and managers’fixed pay.So we summarize and come up with a good in-depth theoretical explanation in the end.(2) We provide the first large-sample empirical evidence for an additional explanation for expense stickiness phenomenon from the agency perspective, which includes "empire-build" motivation and compensation motivation.