The Impact Of Free Cash Flow On Cost Stickiness Empirical Research

Cost control is a key link in the process of enterprise management and evaluation of the core of enterprise competitiveness.Scholars study the relationship between the cost and volume changes,found it is not a simple linear relationship between the two.Usually,higher volumes will drive the cost rise,but when volumes down may not drive costs down,Cost and volume viscosity between asymmetric changes is called cost stickiness.Enterprises may generate free cash flow in daily business activities.In the case of two rights separation,managers and owners are disposition of the free cash flow because of their different target of interests.The manager's opportunism behaviors of the disposition of free cash flow will cause the cost stickiness.But the boards of directors play a role of bridge between managers and owners,the supervision of the board of directors governance,decision-making functions of play can effectively cut down the cost of self-interest behavior caused by management viscosity.Overall,free cash flow is prerequisite to induce managers self-interest behavior,lead to cost of free cash flow agency cost produce and induce viscous phenomenon,and perfect the board of directors,governance can norm and constraint managers9 behavior.Therefore,this article from the perspective of the board of directors9 govermance to study the effect of free cash flow of cost viscous is great significance.Firstly,this paper reviews domestic and overseas literates:fruits of research on cost stickiness include three aspects,cost stickiness existence exploration into influence factors and economic consequences research.Then based on the review of principal-agent theory and corporate governance theory,describe the cost of free cash flow and viscous,the board of directors' governance and cost stickiness and put forward the research hypothesis.After theoretical analysis,this article selects the a-shaxe companies as the research object,then screening and determining 373 listed companies as the object of the paper samples,collect their 2010-2014,a total of 1865 samples data,using Dan Weiss(2010),the new calculation method for the quantitative cost stickiness,set the variables as free cash flow separation and the board of directors,board size,and use descriptive statistical analysis and multiple regression analysis of empirical research from two aspects:spare free cash flow will lead to cost stickiness;Good level of board governance can reduce cost viscous phenomenon.Then,the descriptive analysis found that,observation of 373 listed companies generally has cost degree of stickiness and stickiness differences.From 2010 to 2014,cost viscous phenomenon has been decreasing in Chinese listed companies,most of the companies have no spare free cash flow,but 30%of the listed companies still have free cash flow.Multiple regression results show that the free cash flow will be promoting factor on enterprise cost stickiness;Both separation can ensure that the board of directors independent decisions,relieves cost viscous phenomenon;The board promoting effect on cost viscosity larger;The board of directors meeting the more viscous the cant reduce the cost stickiness.Finally,from two aspects of free cash flow and the board of directors governance puts forward relevant policy suggestions.On the one hand,enterprises should strength control the free cash flow.On the other hand,the enterprises should strength the management of the board,and regulate the behavior of the managers,which embodied in carry on the separate of the board,hold board meeting regularly,and make sure the size of the board.