| Traditional models of cost behavior posit a linear correlation between activities and costs.In short run,total costs equal fixed costs plus unit variable costs multiply by activity volume.Anderson,Banker and Janakiraman(2003)suggest differential slopes based on whether activity is increasing or decreasing.Because the slope is smaller when activity decreases,costs are said to be sticky.Cost stickiness,or asymmetric cost behavior,refers to the observation that the cost of an enterprise increases more when the volume of business increases than when the volume of business declines,which reflects enterprise risk under the fluctuation of macro-economic caused by resource redundancy or allocation dislocation.Further,previous studies believe that cost stickiness can be attributed to three reasons,including adjustment cost,management optimistic expectation,and management agency problem.In the mid-2000 s,the China central government began to repeatedly and publicly declare its intent to upgrade the economy away from traditional industries reliant on low-skilled labor.Since then,central government policy,funding,tax,and innovation efforts have consistently emphasized one goal: to develop a more advanced and technology-driven economy.To accomplish this goal,Chinese policymakers created the concept of strategic emerging industries(SEIs): seven innovative industries just beginning to develop in China,whose expansion could drive China's broader growth as an internationally competitive economy.Strategic emerging industries are the key supporting industries of country.What impact does government subsidy has on strategic emerging industries? Can government subsidy continue to improve business performance? Is there a link between declining corporate performance and government subsidy? Concerning about such issues,we need to further open the black box of internal business decision-making.Following the literature of cost stickiness,we explore the determinants of cost behavior in the context of government subsidy.In this research,we choose the listed companies in Chinese strategic emerging industries between 2007 and 2016 to explore the effect and mechanism of government subsidy on the cost stickiness.Drawing on ABJ(2003)model,it is found that government subsidy has a positive impact on sticky cost,which persists even after self-selection.Besides,the relationship between government subsidy and cost stickiness is more obvious under the lower financing constraints,and there is no significant change in the continuous decline of operating income.It shows that government subsidy could enhance cost stickiness through management agency problem.There is no evidence to support the viewpoint of adjustment costs and management optimistic expectation.Especially,using cost rate of sales revenue and overinvestment to measure management agency problem,the result of intermediary effect supports the view that government subsidy reinforce cost stickiness through management agency problem.In a further analysis,we compare the impact of government subsidies on cost stickiness in different companies and industries so as to reveal the mechanism.The results show that government subsidy increase the degree of cost stickiness through management agency problems is mainly reflected in state-owned enterprises.In addition,compared with other strategic emerging industries,owing to local governments' excessive interference,the enhanced impact of government subsidy on cost stickiness is more significant in the photovoltaic industry.The conclusion not only enriches the theoretical research on factors that influence strategic emerging industries' cost stickiness,but also provides a new way for study of government subsidies' economic consequences.It is of great importance to strengthen the management of enterprises,resource allocation capital utilization and improve the agency problem. |
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