Research On The Mechanism Of Cost Stickiness To Earnings Information Quality And Its Empirical Test

In the free-competition market economy system,as the times progress,the status of cost becomes increasingly prominent,and the increase in corporate profits comes more from the optimization and reduction of their own cost.At the same time,in the course of business operations,many decisions involving economic development resources are limited by cost.If the impact is neglected,the development of the enterprise will be deadlocked,and a large number of investors will be lost.A vicious circle will be formed and the company will also end in a dead end.Therefore,when management and investors assess the economic benefits and development prospects of the company,the cost is a very important factor.In recent years,the academic community has discovered a phenomenon that is inconsistent with the traditional cost-performance theory— cost “stickiness”,that is,the marginal increase in the cost of business costs when the business volume rises is greater than the marginal reduction when the business volume decreases.What kind of information is included in the "stickiness" of cost? How will investors in the capital market view the "stickiness" of cost? Does cost stickiness affect the quality of earnings information?How to influence? Responding to these questions has a positive reference for the cost decision of internal managers,the investment judgment of external stakeholders,and the effective allocation of capital market resources.This paper selects listed companies from 2002 to 2016 in China's manufacturing Shanghai and Shenzhen stock markets as research samples.Based on the coefficient of earnings response,the paper discusses the effects of cost stickiness on the quality of earnings information and the specific mechanisms of the impact,and further tests the stickiness of corporate governance to the impact of cost stickiness on the quality of earnings information.The research results show that in the capital market,investors will consider the impact of cost stickiness on the company's efficiency and development potential.The greater the stickiness of the company's cost,cost stickiness reduces company's earnings response coefficient which has a negative impact on the quality of earnings information.There are two specific mechanisms of action.First,cost stickiness leads to a decline in the company's future free cash flow.Based on the theory of market effectiveness,rational investors will regard this as an unfavorable message and make corresponding investment decisions that affect the current price of the stock.The asymmetry between earnings and stock returns is stronger,and the coefficient of earnings response decreases.Second,cost stickiness makes the company's future earnings more volatile,analysts' profit forecasting accuracy decreases,investors' expectations that rely on analyst forecasts tend to be decentralized,and the surplus response coefficient decreases.Finally,it is found that effective corporate governancecan reduce the cost of entrusted agency,restrain the tunneling behavior of large shareholders,enhance the transparency of listed companies' information,increase the content of earnings information,and weaken the effect of cost stickiness on the coefficient of earnings response.