Management Powers?Debt Constraint And Cost Stickiness

Cost stickiness is the cost behavior characteristic that the increase of cost is larger than the decrease of cost when the volume of business varies.This contradicts the conventional cost theory----cost and volume of business,which vary linearly in proportion.This shows that the cost does not change mechanically with the change of business volume,but is affected by the cost decision-making behavior of the management.This finding also provides a new direction for enterprises to reduce cost and increase efficiency.At present,agency problem is one of the mainstream explanations for the objective phenomenon of cost stickiness,that is,the management's self-interest promotes the adjustment of enterprise resources from the optimal allocation to increase the cost stickiness.According to the management power theory,when the internal governance and external institutional constraints are not effective,the management,as a rational economic man,is more likely to take advantage of its own information resources and organizational power to engage in self-interested behaviors such as in-service consumption and over-investment.Therefore,it is of great significance to explore the influence of management power on cost stickiness,and find out the measures to reduce the negative impact of cost stickiness from the root,and provide new solutions for enterprises to reduce cost and increase efficiency.Based on principal-agent theory,management power theory and existing research literature,this paper first clarifies the mechanism of action between management power and cost stickiness from the theoretical level.Then,according to the theory of contingent governance of liabilities,liabilities can effectively restrain the power rent-seeking behaviors of the management,such as on-the-job consumption and excessive investment,so this can alleviate the agency conflict between shareholders and the management.Based on theoretical analysis,debt constraint,as an external governance mechanism,has an influence on the management power and cost stickiness.This paper introduces debt constraint as a moderator variable into the research framework of management power and cost stickiness.The expenses studied in this paper refer to the administrative expenses and sales expenses of enterprises,in other words,sales and management expenses.Therefore,three hypotheses of this study are proposed :(1)There is a phenomenon of cost stickiness in China's manufacturing listed companies;(2)When other conditions remain unchanged,there is a positive correlation between the management power and the cost stickiness;(3)Debt constraint can affect the relationship between management power and cost stickiness.This paper selects the datas of manufacturing enterprises listed before January 1,2012 in the A-share listed companies of Shanghai and Shenzhen stock exchanges from 2014 to 2017,conducts an empirical study by building a linear logarithmic regression model,and demonstrates the hypotheses proposed respectively.The empirical results show that :(1)There is indeed a phenomenon of cost stickiness in China's manufacturing listed companies.Specifically,when the operating income increases by 1%,the sales and management expense increases by 0.628%;When the operating income decreases by 1%,the sales and management expense decreases by 0.307%;(2)After controlling the variables of asset intensity,employee intensity,continuous decline of operating income and net interest rate of sales,there is a significant positive correlation between management power and cost stickiness;(3)Debt constraint,as an external governance mechanism,can effectively curb the negative impact of management power on the stickiness of expenses when control variables remain unchanged.Further research shows that debt of different sources and different maturities can restrain the positive correlation between management power and cost stickiness.