Research On The Relationship Between Executive Incentives,Free Cash Flow And Cost Stickiness

With the rapid progress of the international economic integration process,the competition between enterprises is increasingly intensified.In order to maintain the rapid and stable development of China's economy and continuously enhance the comprehensive national strength,we must improve the level of scientific and technological innovation and promote the long-term and stable development of information technology enterprises.On the one hand,information technology enterprises must carry out timely and efficient innovation input,strengthen the transformation of innovation input,and constantly improve their core competitiveness;On the other hand,we must optimize the cost management system and improve the efficiency of cost management.The study on the cost stickiness of information technology industry is of great significance for improving the cost management level,strengthening cost control and enhancing the development potential of information technology industry.This paper studies the influence of long-term equity incentive and short-term salary incentive on cost stickiness in information technology enterprises,and verifies that senior managers in enterprises are mainly influenced by free cash flow,an intermediary variable,after being stimulated.By using the financial data of the information technology industry from 2013 to 2017 as the research sample,using the research model of Anderson et al.,and using Excel and Stata11 statistical software for empirical test,the following conclusions are finally obtained :(1)there is an obvious cost stickiness phenomenon in China's information technology enterprises;(2)information technology enterprises implement long-term equity incentives for executives,executive self-interest and enterprise long-term interests,based on its own benefit maximization,will use more of the free cash flow of the state-owned enterprises long-term,strategic investment,increase the long-term value of the enterprise,the characteristics of the strategic investment is to adjust the high cost,eventually led to the decrease of the enterprise business and cannot cut corresponding costs in time,the enterprise cost viscosity rise;(3)information technology enterprises implement short-term compensation for executives,executive short-term self-interest and enterprises performance,managers in order to obtain short-term compensation,in the current period of business volume decline will cut costs accordingly,timely appropriate reduce their on-the-job consumption,retain more free cash flow to repay debt or pay dividends,in order to improve its own performance evaluation,for short-term compensation.At this point,the cost of timely reduction with the volume of business,enterprise cost viscosity level reduced.With the continuous improvement of corporate governance in China,the incentive system for senior executives is also improving,but there are still some deficiencies.Although the current compensation incentive system can alleviate the enterprise cost stickiness in the short term,it is at the cost of damaging the long-term value of the enterprise.In addition,compared with western developed countries,the degree of long-term equity incentive of Chinese enterprises is too weak to give full play to the effect of long-term incentive,and the degree of long-term incentive should be increased.In the future,China's information technology enterprises should establish a perfect incentive system to ensure the cost stickiness at an appropriate level.