Internal Controls?Managers' Self-interest And Cost Stickiness

With the increasingly high degree of marketization,it is more and more important for enterprises to manage and control the cost.As a capital investment to enterprise,costs have the most direct influence on the performance of enterprises.Since the first time the concept of Cost Stickiness was proposed in accounting filed,scholars has taken notice of it both here and abroad.Besides,the rationalization of costs and expenses also provides a new perspective of management optimization for enterprises to restrain expenses.Due to the difference between the owners and managers of the economic benefits,as a rational economic person,managers will be over investment,on-the-job consumption,as the executive of economic activity,their behavior determines the direction and quantity of resources investment,therefore,the behavior of manager will lead to cost stickiness.In this paper,based on the principal-agent theory,"economic man" hypothesis and behavioral science theory,we respectively study the free cash flow and the fixed salary proportion relationship with the cost stickiness,analyzing the theoretical reasons about management's self-interest boosting Cost Stickiness.As the internal mechanism directly related to the cost and risk management,the internal control will inevitably impact on cost management,it is the strict and complete system to attain control goals.At present,the relationship between internal control and Cost Stickiness has seldom been studied in the academic area.We are trying to study the effect of internal control on the Cost Stickiness caused by managerial self-interest.Based on regression test of the sample chosen from China A-share company board from the 2010 to 2014,with the Cost Stickiness as the starting point,we study the influence of managerial self-interest to cost stickiness,and further explore how the internal control affect the relationship between the managerial self-interest and cost stickiness,and find that:(1)the cost stickiness is existed in listed manufacturing companies;(2)the degree of cost stickiness is positively associated with a firm's FCF,the degree of cost stickiness is negatively associated with fixed pay ratio of manager's compensation scheme;(3)the association between the agency problem and the degree of cost stickiness is weaker in firms with overall and strict internal control.