Effect Of Top Manager Turnover On Cost Stickiness

"Cost stickiness" suggests that the direction of the changes in sales have an influence on the marginal changes of expenses.However,according to the traditional cost model,the expenses change symmetrically with changes in the sales,and the marginal changes of expenses has nothing to do with the direction of the changes in sales.It is obvious that the cost stickiness does not conform to the law of the expense changes under the assumption of the traditional cost model.Now cost stickiness exists widely in the companies,which reflects with economic development becoming increasingly complex,simple and idealized cost models can no longer explain the rules of the expense changes in companies.Now agency issues is the more popular interpretation of cost stickiness.The theory holds agency conflicts between managers and shareholders cause managers will have self-interest incentives when making decisions about adjusting various expenses and results in cost stickiness.Therefore,the expenses are not only influenced by the sales,but also are the result of top managers' decision-making,especially self-interest incentives.The phenomenon of top manager turnover is frequent among the listing corporations.As an important part of corporate governance,top manager turnover has been the focus of practice and academy.In the condition of the separation of two rights,the agency problems bring in managers' a series of self-interest actions,which will influent the cost stickiness.Combined with top manager turnover,a lot of previous studies suggest new top manager will increase expenses in the year of top manager turnover in order to decrease expenses and improve the operating performance in the year after turnover.This will help themselves exhibit ability in operation and have a good reputation.At the same time,the level of cost stickiness increase in the year of top manager turnover and decrease in the year after turnover.Therefore,the thesis predicts the top manager turnover will have an influence on the cost stickiness.In addition,the thesis also holds the reason of top manager turnover and the source of new top managers will have different influences on cost stickiness,so the thesis considers different conditions.The thesis chooses the listing corporations from 2009 to 2014 as samples,puts forward four hypotheses,and adopts empirical tests,the results show that:First,in order to control inherent differences in companies' cost stickiness,the thesis adopts the pairing method and confirms in the year of top manager turnover,the companies which change top manager show higher cost stickiness.In the year after turnover,the companies which change top manager show lower cost stickiness.And in the robustness test,the thesis finds that in the second year after turnover,the influence of turnover on the level of cost stickiness is not significant,which indicates the influence of turnover on the level of cost stickiness is likely to be a short-sighted behavior under self-interest incentives.Second,the companies which the reason of top manager turnover is non-routine show higher cost stickiness.Third,the companies which the source of new top managers is external show higher cost stickiness.In addition,the thesis uses the extra test and finds when the reason is occupation mobility,the top manager turnover does not have significant influence on cost stickiness.Therefore,it is necessary to specifically analyze the influence of certain turnover reason on the level of cost stickiness.Due to the limitation of the obtained data,this thesis only makes a preliminary analysis.In brief,the contribution of the thesis is from the perspective of managers' self-interest incentives,analyzing whether the top manager turnover,the turnover reason and the source of new top managers will impact cost stickiness.The thesis will help companies discover new top managers' self-interest behaviors when adjusting expenses,perfect performance evaluation system of top managers,establish effective governance mechanism,prevent expenses deviating from the optimal allocation,and realize effective expense control.