Cost stickiness, corporate risk and management shareholding

Zhang Yan

doi:10.1051/e3sconf/202125303050

Abstract

Normally, the cost stickiness in enterprises further reduces the efficiency of asset allocation and the accuracy of earnings decision, thus aggravating the risk taking. This paper takes Chinese A-share listed companies from 2009 to 2019 as samples to empirically test the impact of cost stickiness on enterprise risk and the moderating effect of long-term incentive mechanism on this impact. The results show that cost stickiness increases corporate risk significantly. Management shareholding further aggravates the impact of cost stickiness on corporate risk. After further analysis, it is found that cost stickiness significantly increases corporate investment risk, meanwhile, cost anti-stickiness also significantly increases corporate risk, and management shareholding also aggravates the impact of cost anti-stickiness. This study further expands the research on the economic consequences of cost stickiness, also provides new ideas for enterprises to control the level of management shareholding to further restrain the degree of cost stickiness.

Highlights

In the context of increasing uncertainty in the current macroeconomic environment and fierce competition in all walks of life, enterprises face the dual challenges of macro environment and operating efficiency
A number of studies have found that both the uncertainty of macro environment and the low efficiency of enterprise internal resource allocation are relevant with enterprise cost stickiness, so enterprises have to pay attention to cost management if they want to seek long-term stable development
The coefficient of cross multiplication term is significantly negative at the level of 10%, which is -0.0106, indicating that the increase of management shareholding ratio aggravates the negative influence of cost stickiness on enterprise risk

Summary

Introduction

In the context of increasing uncertainty in the current macroeconomic environment and fierce competition in all walks of life, enterprises face the dual challenges of macro environment and operating efficiency. Most of the existing studies on the economic consequences of cost stickiness focus on the forecast of cost stickiness to earnings and the influence of corporate performance [3], paying less attention to the impact of cost viscosity on enterprise risk. The existence of agency problem will make the managers pay more attention to their own interests in the overall resource planning, increasing the asymmetry between cost and income, reducing the efficiency of enterprise resource utilization, and leading to greater risks in business activities. Many scholars have found that managerial ownership, as a long-term incentive mechanism, will bring both the convergence of interest effect and the trench defense effect to enterprises Under the former, the granting of equity to managers make them take the long-term interests of enterprises as the decisionmaking target. This paper may make the following two contributions :(1) To expand the research perspective of economic consequences of cost stickiness in the existing literature. (2) To find out the reasons for deepening the degree of cost stickiness, and provide new ideas for enterprises to solve the problem of cost stickiness

Hypotheses development

Sample and variable measurement

Model design

Descriptive statistics

Findings

Conclusion