Empirical Research On The Influence Of Earnings Management To Cost Stickiness: Evidence From Manufacturing Listed Companies

In the context of supply side reform, reducing the cost of the enterprises, maintaining the competitive advantage of products and improving the ability of continuous operation of enterprises are the most important tasks. The promotion of the comprehensive competitiveness of enterprises can not be separated from efficient cost management measures. Therefore,strengthening cost management is the eternal theme of enterprise sustainable management. Cost stickiness means that when the volume of business increases the marginal change rate of enterprises’ cost is greater than the marginal change rate when the volume of business reduces.The stickiness of cost leads to the difficult decrease of enterprise cost and waste of resources.This is related to the agency problems arising from business managers and owners. The managers in order to increase pay and control resources, then earn management of financial revenue and expenditure of the enterprise. Scholars at home and abroad pay little attention to the study of the relationship between earnings management and cost stickiness. Therefore, this article embarks from the earnings management view, discusses the influence of earnings management motivation and mode on cost stickiness, in order to improve the enterprise cost and resource utilization efficiency, adapt to the new trend of economic development.This thesis is based on the principal-agent theory and the incomplete contract theory,selects the listed manufacturing companies as samples in both Shanghai and Shenzhen stock exchange market from 2012 to 2015, and calculates the quantitative indicators of earnings management motivation and methods, then the classical ABJ model is used to test the influence of the motivation and mode of earnings management on the stickiness of cost. Those are the empirical results: (1) The general cost of manufacturing listed companies in China is characterized by stickiness, and there is no equal increase or decrease between cost and business volume. (2) The agency problem between enterprise managers and owners is an important cause of cost stickiness. Managers manipulate the accounting surplus for self interest purposes, which affects the change of revenue and expenditure, and is the key to the decrease of cost.(3) The choice of earnings management motivation has different effects on the law of cost stickiness. Among them, turn profit index, avoid loss index, small profit index can reduce the enterprises’ cost stickiness, and the "Big Loss" index can increase the cost stickiness.(4) From the perspective of the earnings management methods, the enterprises’ real activity earnings management is negatively correlated with the cost stickiness, while the accrued items earnings management is not significant related to the cost stickiness. Real activity earnings management affects accounting accruals, operating cash flows and cost stickiness through fictitious trading activities or controlling trading points. And the accruals are adjusted by adjusting the book value of the account. With the implementation of the new accounting standards, the audit procedures are strictly regulated, and managers are using real activities to manipulate the surplus. The research conclusion of this paper has opened up a new research field of earnings management and cost stickiness, and it provides important empirical evidence to prevent enterprise costs from expanding blindly, improve costs and resource utilization efficiency, and optimize investors’ decision-making and master external supervision.On the basis of empirical analysis, this paper puts forward some suggestions: Establish the objective consciousness of cost stickiness, strictly control the cost and expenses, and build a comprehensive index system of cost stickiness and serve the management incentive compensation mechanism; Improve the ability to identify earnings management activities,strengthen cooperation between internal and external supervision departments to reduce the negative impact of stickiness ,and promote sustained and healthy development of enterprises..