Empire Building,Financial Redundancy And Cost Asymmetry

In recent years,cost asymmetry is a hotpot in management accounting.Now competition is becoming more and more fierce,and the cost controlling has a crucial impact on the development of enterprises.Existing research shows that the drivers of cost stickiness include contractual costs,efficiency and opportunism,and the interaction of these three factors lead to cost stickiness.Studies have confirmed that managers’ motivation of empire building has a positive effect on cost stickiness,which is referenced by many related researches.Then what impact will the specific empire construction behavior have on the cost asymmetry?And there is two opposing views about the role of financial redundancy in the academic community.What impact will it have on the relationship between empire construction and cost asymmetry as a redundant resource?Our study uses size’ growth rate,excessive investment and M&A as proxies for empire building behaviors and study the relationship between empire building behaviors and cost asymmetry.Then,financial redundancy is divided into cash redundancy and debt redundancy to further study the influence on the relationship beween empire building behaviors and cost asymmetry.The results show that:(1)there is s significant positive correlation between empire building behavior and cost asymmetry.In detail,the speed of size’ growth rate will increase the degree of cost asymmetry;the excessive investment will increase the degree of cost asymmetry;and the positive correlation between M&A behavior and cost stickiness is unclear yet.We give it two explanations:first,companies just merge to improve the financial statements;second,the impact of substantial M&A takes time.(2)The correlation between empire building behaviors and cost asymmetry is stronger in enterprises with high level of financial redundancy.In detail,high levels of cash redundancy and debt redundancy will increase the positive correlation between the speed of size’ growth and cost asymmetry and the positive correlation between the excessive investment and cost asymmetry.When cash redundancy and debt redundancy levels are low,the speed of size’ growth will significantly reduce the cost of stickiness.Our study can help companies to control the agency costs and make a more reasonable financial policy to optimize the allocation of resources.