Empirical Research On The Relationship Between Executive Incentive,Over-investment And Cost Stickiness

With the continuous development of' Chinese economy,the competition between enterprises is increasingly fierce.In order to stand out in the market,cost management is particularly important.The view of traditional cost state theory is that the cost changes with the business volume.However,with the deepening of the theory,some scholars began to realize that the cost and business volume are not strictly linear.and this phenomenon is called "cost stickiness".As soon as this concept is put forward,it has aroused wide discussion among researchers,among which the factors affecting cost stickiness are the most discussed.Agency problem is considered as one of the main causes of cost stickiness,and executive incentive can alleviate the agency problem and affect cost stickiness.This thesis tries to study the influence of explicit incentive and implicit incentive on cost stickiness from the perspective of executive incentive,and verify whether executive incentive can influence cost stickiness through the mediating variable of over-investment,so as to enrich the theory of cost stickiness.This thesis discusses the relationship between explicit incentive,implicit incentive and cost stickiness of executives and the mediating role of over-investment in them by means of theoretical analysis and empirical analysis.In terms of theoretical analysis,therelevant literature on cost stickiness,as well as the literature on the correlation between executive incentives,over-investment and cost stickiness are reviewed to pave the way for the hypothesis of future research.In the aspect of empirical analysis.hypotheses are proposed on the basis of scholars' research,data within the research scope are selected.variables are defined,and models are constructed according to the assumptions of this thesis.Then,Richardson's investment efficiency model is regressed to obtain the over-investment variable,and then the ABJ logarithm model and its deformation are used to study the cost stickiness.Finally,descriptive statistics,correlation regression analysis,empirical results analysis,and robustness test of the main variables are conducted to verify the hypothesis and draw conclusions.The final conclusions are as follows:(1)When implementing equity incentive for senior executives,the interests of senior executives depend on the long-term performance of the enterprise,and the objective function of senior executives and the objective function of the enterprise are infinitely close.In this way,senior executives not only consider their own interests when making decisions,but also consider the performance of the enterprise;(2)In order to build their own business empire,senior executives will not hesitate to invest funds in investment projects with negative NPV to expand the enterprise's operation scale,and at the same time.it also provides convenience for them to obtain more in-service consumption,so the existence of in-service consumption will stimulate senior executives to over-invest and thus increase the cost stickiness level;(3)When enterprises implement equity incentive and in-service consumption at the same time,as equity incentive is a long-term and short-term incentive method,which is related to the long-term interests of executives and far more beneficial than in-service consumption,executives will reduce in-service consumption,make reasonable investment,complete the enterprise performance and weaken the stickiness of enterprise cost.The innovation of this thesis lies in:(1)The innovation of the research angle.In the previous studies on the relationship between executive incentive and cost stickiness,most scholars divided executive incentive into compensation incentive and equity incentive from the long and short term,but neglected the role of implicit executive incentive.From the perspective of incentives,this thesis divides executive incentives into explicit incentives and implicit incentives,and not only studies the relationship between them and cost stickiness,but also explores the influence of the interaction between the two incentives on cost stickiness.(2)Innovation in research content.Previous scholars study the direct relation between executive incentive and viscous cost quite a lot,but few scholars to explore what take the bridge between the two,this thesis hopes to explore the mediating effect of excessive investment,to reveal the black box of executive incentive and cost between viscous,executives and excessive investment as a intervening variable,to explore whether the executive incentive indirectly through the mediation of over-investment and impact on cost stickiness.