The Effects Of Managers Overconfidence On Cost & Expense Stickiness

In the traditional cost behavior model,,there is inevitable linear relationship between the changes of cost and volume of business.However,more and more scholars have overturned this model.They foud that the marginal changes of costs has nothing to do with the direction of the changes in the activity.Anderson et al put forword the "Cost Stickiness" firstly,which refers to the asymmertric behavior in the sense that costs appear to increase more with an activity increase than they decrease with an activity decrease.Cost management is an inportant part of manufacturing enterprises’ production and management activities.Reducing the cost has been an important role of improving market competitiveness to manufacuring enterprises.In the process of reducing the cost,the cost cannot make the same adiustment with the decline of the business volue,which appear the cost stickiness.The existence of this phenomenon has a negative impact on enterprises’ cost management resulting in the slow performance of the enterprise market reactin.And this has becom an obstacle to the development of chinese manufacturing enterprises.Therefore,the cost stickiness of manufacturing enterprises in China is of great theoretical significance and practical value.Since the concept of "Cost Stickiness" came into being,scholars both at home and abroad began to analyze and study the causes of the cost stickiness.Based on a review of related literatures, cost stickiness will be influences by managerial cost decision-making behavior and managerial subjective factors. According to the research of psychology,managers are more likely to be over-confident.Therefore,in this paper the author interprets mangerial overconfidence into the study of cost stickiness,so as to analyze the influence of the mangerial overconfidence on the cost stickiness.In this paper,the author select the sample of manufacturing listing corporatin in China during the period of 2009 to 2013to make empirical study.We find that:Cost stickiness is existed in maufacturing listing corporatin in China;Mangerial overconfidence will make the degree of cost stickiness greater.Considering the evaluation system of state-owned holding enterprises in our country for the management is more stringent and may affect the overconfidence of managers,the sample is divided into state-owned and non state-owned enterprises.Compared with the stated-owned enterprises,the overconfidence of managers in the non state-owned holding enterprises has more effect on the cost & expense stickiness.Based on these conclusions,this paper puts forward some suggestins on the suppression of cost stickiness from the perspective of managerial overconfidence.It is beneficial to reduce the negetive effect caused by cost stickiness,so as to improve manageria level of cost decision.This paper analyzes cost stickiness from the perspective management,which will strengthen managers’understanding on cost behavior.Therefore managers can make more accurate decision to promote enterprise performance.