Board Social Independence,Traditional Religion And Cost Stickiness

According to the traditional theory of cost behavior,the change of cost and expense will change linearly with the volume of business(yield and sales volume).However,with the deeper research and discussion on the theory,scholars gradually find that changes in the cost is not strictly has a linear relation with the change of volume,the cost changes will also be affected by other external conditions and internal factors,such as macro environment,economic policy,political fluctuations,etc.,internal factors such as management power,internal control quality,competitive strategy decisions,the concept of " cost stickiness" was first proposed in 2003 and used it to explain the phenomenon that the cost reduction when the business volume level drops by 1 unit is less than the cost increment when the business volume level rises by 1 unit.The causes of cost and expense stickiness include managers'optimistic expectations,principal-agent problems,etc.,that is,the cost and expense stickiness cannot be separated from the management decision-making behavior,especially when management has self-interested motives,management is more inclined to make opportunism,which leads to an increase in the cost-effectiveness of the company.At present,the research on the factors affecting the cost and expense of domestic and foreign literature mostly focuses on the external environment,industry and company characteristics,management behavior,corporate governance,etc.,while the research on internal governance mainly focuses on internal control quality,independent directors,and personal characteristics of senior management,etc.,which are not rich in the study of the role of the board of directors of the listed company on the cost stickiness.Since agency problems can lead to cost stickiness,and board independence is the basis for corporate governance effectiveness,will the effectiveness of board supervision become more effective in reducing cost stickiness?Based on the social network and social identity theory,this paper introduces the concept of social independence of the board of directors including cognition and relationship,and examines the impact of the social independence of the board on the cost stickiness to enrich the existing literature and give reasonable suggestions.This paper uses the data of Shanghai and Shenzhen A-share manufacturing listed companies in 2008-2014 and put forward two basic assumptions for cost stickiness and conduct empirical research.the main conclusions are as follows:First,in the sample company,the social independence of the board of directors has a significant inhibitory effect on the cost stickiness.The stronger the social independence of the board,the lower the cost stickiness;Second,distinguish the degree of influence by traditional religions,the above-mentioned inhibition mainly exists in the case that the sample companies are weakly affected by traditional religion,that is,under the weak influence of traditional religions,the social independence of the board of directors has a strong inhibitory effect on the cost stickiness,but there is no significant influence when it is strongly influenced by traditional religion,which indicates that traditional religions and formal institutions have an alternative governance role to some extent;Third,further research shows that the social independence of the board of directors has heterogeneity on the effects of different types of cost viscosities.The social independence of the board of directors has a significant effect on the management cost stickinesss and,in addition,consistent with the findings of traditional religious influences,in the companies that are less affected by traditional religion,the social independence of the board of directors has a stronger governance effect on cost stickiness.Based on this,this paper puts forward the following suggestions:On the one hand,the company should strengthen the independence of the board of directors,not only should pay attention to the matching of the personal characteristics of the board and the CEO,but also the independence of social relationship between the board members and the CEO,improve the quality of governance of the board of directors,and construct a reasonable and efficient board governance model,so as to make it an effective supervision and restraint mechanism for listed companies;On the other hand,enterprises should give full play to the role of traditional religion,absorb the essence of traditional religion,abandon their irrational parts,integrate with corporate culture,and strengthen the moral and ideological education of employees and management of the company,and improve the moral and ethical level of individuals through its educational function,so as to reduce agency costs and ensure the long-term development of enterprises.All in all,the main contribution of this paper is to analyze the impact of social independence of the board of directors on the cost of corporate expenses in detail from the perspective of social network and social identity theory,which will help enterprises to inspire managers to improve the governance system of the board of directors.Actively exerting the moral education role of traditional religions and incorporating them into the corporate culture construction will help ease the agency problems of enterprises and maximize the value of enterprises.