Research On The Impact Of Executive Compensation On Cost Stickiness In The Presence Of Financial Constraints

Cost is the lifeblood of an enterprise.Cost management is the core part of an enterprise's response to external competition and production management.It has also been the most concerned aspect of the board of directors,management and financial personnels.The traditional cost hypothesis is that the change of enterprise cost should be proportional to the change of business volume,but more and more scholars have found through empirical research that the cost and business volume do not show a symmetric relationship,that is,there is “cost stickiness” phenomenon.Since the introduction of “cost stickiness”,domestic and foreign scholars have made in-depth research on the existence,causes and influencing factors of cost stickiness in various industries.Studies have shown that the agency problem of enterprises is the main cause of cost stickiness phenomenon,a key measure to reduce agency costs is to strengthen the compensation incentives for management,and an important part of the enterprise's adjustment costs is financing costs.Based on this,we select high-tech listed companies,analyze its 2012-2017 financial related data,examine the existence of cost stickiness and the impact of executive compensation on cost stickiness.At the same time,we explore the strength of cost cohesiveness and the strength of executive compensation under the different degree of financial constraints,analyze the impact of financial constraints on the relationship between the two.In order to make the research of the thesis more in-depth,this paper introduces the case of “Focus Technology”,which deeply analyzes the impact of financial constraints,cost stickiness and executive compensation on the cost stickiness since its listing.The conclusions obtained from the empirical research are as follows:(1)China's high-tech listed companies generally have cost stickiness,and enterprises with high degree of financial constraints have less cost stickiness.(2)Under the same conditions,executive compensation has a significant inhibitory effect on cost stickiness.(3)The enterprise's executive compensation with low degree of financial constraints inhibits the cost stickiness more than companies with high degree of financial constraints.Based on the above theoretical analysis and empirical test,the policy recommendations proposed in this paper are as follows: Improve the executive compensation management system and establish a compensation committee system;Improve the information disclosure system and give play to the role of the market;Optimize corporate governance structure and improve managerial level.