Research On The Impact Of Executive Compensation And Internal Control On Cost Stickiness Under Pay Restrained Policy

Reducing costs and enhancing competitive advantage of enterprises as well as promoting economic restructuring is one of the five major tasks of supply-side structural reform of China.In order to improve the overall performance of the enterprises,it is necessary not only to expand the market to boost demand,but also to improve production efficiency and profitability with rational allocation and control of production and management costs.The top source of the high costs for enterprises is the lack of cost control.With the overall economic growth rate of China slowing down and the overall market showing a weak trend,the need for reasonable costs management and control of enterprises becomes urgent.The traditional cost behavior theory believes that within a certain range,the cost of an enterprise varies proportionally with its sales volume.However,some scholars have found that in the actual operation and management of enterprises,it's not true.When the sales volume decreases,the cost may decrease lesser less than the extent of increase in the cost when the sales volume rises.This is called the cost is sticky;on the other hand,if it is greater,then the cost is anti-sticky.Anderson,for the first time,named this asymmetric phenomenon of cost change "cost stickiness".This concept posed a great challenge to the traditional cost behavior theory and aroused widespread discussion in the academia.Some studies have shown that the sales and management costs of enterprises have obvious sticky characteristics,since compared with the operating costs,the discretionary expenses of sales and management costs account for a large proportion and is more susceptible to human factors,that is,the influence of management.Research both home and abroad remains consistent in that the management's behaviors has a significant impact on enterprise cost stickiness,however,as to the mechanism of the impact,there is only theoretical analysis.Little research focuses on the correlation between cost stickiness and salary level,which can directly affect the management's self-interest motivation and behavior.At the same time,under the stricter requirement for enterprises to improve the internal control system,management' behaviors are more constrained.Therefore,this paper will further study the relationship between managerial compensation,internal control level and enterprise cost stickiness.This article takes the public data of listed state-owned enterprises in 2014-2017 as sample data.In the model,the sales and management costs and operating costs are used as the dependent variables to verify the existence of cost stickiness with management remuneration and internal control level as proxy variables.The empirical study shows that in listed state-owned enterprises,sales and management costs are obviously sticky,and the sticky characteristics of operating costs are not significant.Management remuneration can reduce the stickiness of sales and management expenses,and the higher the remuneration,the lower the stickiness of the operating costs.The internal control can also reduce the cost-stickiness of the enterprise,especially for the sales and management costs.As human capital intensity can strengthen the enterprise cost stickiness,higher internal control level can weaken it.After the issuance of the salary cap,the stickiness of the sales and marketing costs of the enterprises is reduced,while the stickiness of the operating costs is increased.With the incentive theory,this phenomenon can be attributed to the salary cap,which not only restrains the management's self-interest means but also reduces their enthusiasm.