Regional cultural diversity and corporate cost stickiness: evidence from Chinese dialects

This study investigates the impact of regional cultural diversity on corporate philanthropy. We find that regional cultural diversity is negatively associated with corporate philanthropy. The mechanism analyses show that relationship between regional cultural diversity and corporate philanthropy is more pronounced in firms with lower CEO empathy and media coverage, indicating that regional cultural diversity reduces corporate philanthropy by affecting altruistic motive and reputational motive of firms. In addition, the relationship between regional cultural diversity and corporate philanthropy is more pronounced in regions with lower social trust.

There is extensive literature on the relationship between regional diversity and the economic performance of workers, firms, and regions. This paper considers the effects of regional cultural diversity on firm level innovation. The identification of corresponding effects involves important econometric issues. Two econometric problems arise in particular with regard to the impact of cultural diversity: the potential endogeneity of population diversity and composition effects, i.e., the sorting of specific firms into culturally diverse locations. Against this background, we critically review the previous evidence on effects of regional diversity on the economic outcomes of firms, with a focus on innovation. We complement the literature survey with an empirical analysis on the importance of composition effects for the correlation between cultural diversity of German regions, specifically regional R&D employment, and firm innovation. We make use of a multilevel panel data set that provides detailed information on German establishments for the period 1999 to 2010. A comparison of models with different sets of control variables and fixed effects enables us to evaluate the significance of sorting effects, i.e., whether the correlation between the cultural diversity of regions and firm innovation is due primarily to innovative firms that choose to locate in culturally diverse regions. Our results suggest that, in fact, sorting of innovation-prone firms into specific locations seems to be more important to explain spatial disparities in innovation output than effects of regional diversity on firm innovation.

With the increase in the seriousness of environmental issues and investors’ increasing concern for corporate environmental performance, more and more scholars are paying attention to the impact of executive diversification on corporate investment decisions. This study empirically examines the impact of regional cultural diversity in executive teams on corporate environmental investment and its moderating effect on different industries and regions, using companies listed in China from 2009 to 2019 as research samples, from the perspective of informal cultural systems. The research results indicate that: regional cultural diversity in executive teams can significantly promote corporate environmental investment; regional cultural diversity in executives is more conducive to increasing environmental investment in competitive industries, while the promotion effect of environmental protection investment in monopolistic industries is not significant; and diversity in regional culture in top management teams is more conducive to the promotion of environmental investment by coastal enterprises, while the promotion of environmental investment by non-coastal enterprises is not significant.

Cultural features may exert significant impact on firm behaviour. Through a sample of listed A‐share firms on the Shanghai and Shenzhen Stock Exchanges, we find that Confucian culture may significantly lower firms' cost stickiness. Our mechanism tests suggest that ideologies of self‐discipline and prudence embedded in Confucian culture may mitigate agency issues as well as overestimation of firm earnings. Furthermore, such impact is more pronounced among firms of lower shareholding by institutional investors or of weak internal control, which suggests that Confucian culture may help rectify the imperfection of corporate governance. Lower cost stickiness may also reduce firm risk.

Managers are important human capital of firms and their personal characteristics can have direct and significant effects on firms’ decision behaviour and value creation. This paper explores this issue from the perspective of cost stickiness, using data from manufacturing firms listed on the Shanghai and Shenzhen Stock Exchanges of China over the period 1999 to 2011. The results are the following. (1) The gender and age of a chairperson can significantly affect a firm’s cost stickiness. Firms with a male chairperson or a young chairperson tend to have higher cost stickiness. However, the chairperson’s tenure does not significantly affect cost stickiness. (2) The degree of bank supervision may influence the relationship between gender/age and cost stickiness. When the degree of bank supervision is high, a chairperson’s personal characteristics do not significantly affect a firm’s cost stickiness. (3) The impact of a chairperson’s personal characteristics and bank supervision on a firm’s cost stickiness is reflected mainly in non-labour costs. Further tests show that long-term and short-term bank loans, as well as bank loans for state-owned and non-state-owned listed firms, have good supervision effects. Overall, these results show that managers’ personal characteristics and bank supervision have an important impact on their firms’ cost behaviour.

It is of great value to study the stickiness of enterprise cost for reducing enterprise cost and improving enterprise performance. This paper selected all A-share non-financial listed companies from 2014 to 2019 to study the impact of executive power and employee stock ownership plans on cost stickiness. The study found that the higher the executive power, the stronger the cost stickiness of the enterprise. By reducing the adjustment costs and optimistic expectations of management and improving the performance sensitivity of executive compensation and quality of information disclosure, an employee stock ownership plan plays a role in suppressing the cost-stickiness effect of executive power. The larger the scale and the more times the employee stock ownership plan is implemented, the stronger the inhibition effect is. An employee stock ownership plan has a stronger inhibiting effect on the cost-stickiness effect of executive power in enterprises with a large proportion of state-owned and institutional shares and high employee status. Combining the research themes of management accounting and financial accounting, this study discusses the economic consequences of ESOP from the perspective of enterprise cost control, which is helpful for internal and external stakeholders of enterprises to understand the characteristics and effects of ESOP in the new era, and also provides new evidence for enterprise cost control while enlightening policy makers and listed companies to explore the feasible mechanism of enterprise cost control from the staff level. It is of great value to study the stickiness of enterprise cost for reducing enterprise cost and improving enterprise performance. This paper selected all A-share non-financial listed companies from 2014 to 2019 to study the impact of executive power and an employee stock ownership plan on cost stickiness. It is found that the higher the executive power, the stronger the cost stickiness. An employee stock ownership plan has a stronger inhibiting effect on the cost-stickiness effect of executive power in enterprises with a large proportion of state-owned and institutional shares and high employee status. This study provides new evidence for corporate cost control.

Against the backdrop of rapidly advancing emerging digital technologies, digital transformation is increasingly integrated with enterprise production and management activities. Based on data from A-share listed companies in China from 2012 to 2023, this paper investigates the impact of digital transformation on cost stickiness. The study finds that digital transformation significantly suppresses cost stickiness in enterprises, and this conclusion remains robust after a series of sensitivity tests. The inhibitory effect of digital transformation on cost stickiness is more pronounced in small and medium-sized enterprises, asset-intensive firms, non-state-owned enterprises, and enterprises located in central and western regions. Mechanism analysis reveals that digital transformation can reduce cost stickiness by enhancing the quality of internal control and improving the transparency of accounting information. These findings have important implications for encouraging enterprises to accelerate digital transformation, reduce cost stickiness, and achieve high-quality development.

PurposeThis study aims to examine the cost stickiness among the firms listed in six Gulf Cooperation Council countries and whether the Shariah compliance status has an impact of on corporate cost behavior.Design/methodology/approachThe present study uses a sample of non-financial firms listed in six Gulf Cooperation Council (GCC) countries to show that the Shariah compliance status of the firm affects its cost behavior. The study uses panel ordinary least squares and Heckman’s selection bias models to test the hypothesis of the study.FindingsFirms classified as Shariah-compliant experience more cost stickiness compared to non-Shariah-compliant peers. This behavior is attributed to the restrictions on external financing options that Shariah corporates experience. Further analysis shows that the Islamic financial development of a country plays an important role in reducing the cost stickiness among the Shariah compliant firms.Originality/valueThe role of Shariah compliance in a firm’s cost structure is not well-explored in the current literature. This study is the first to investigate the relationship between cost stickiness and Shariah compliance. Further, the study establishes a nexus between cost stickiness, Shariah compliance and Islamic financial development.

Traditional models of cost behaviors posit a linear correlation between activities and costs. In short run, total costs equal fixed costs plus unit variable costs multiply by the activities volume. Thanks to the model’s ubiquity, it is of considerable interest to examine the validity of this simple specification. Researchers have examined how complexity（Anderson, 1995; Banker, et al., 1990）and congestion（Gupta, et al., 2006）affect the shape of the cost curve. Anderson, Banker and Janakiraman（2003）suggest differential slopes based on whether activities are increasing or decreasing. Because the slope is smaller when activities decrease, costs are said to be sticky. Cost stickiness, or asymmetric cost behaviors, refer 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 risks under the fluctuation of macro-economic caused by resource redundancy or allocation dislocation. Furthermore, previous studies believe that cost stickiness can be attributed to three reasons, including adjustment costs, management optimistic expectations, and management agency problems （Banker, et al., 2013）. Following the literature of cost stickiness, we explore the determinants of cost behaviors in the context of government subsidies. In this paper, we choose the listed companies in Chinese strategic emerging industries between 2007 and 2016 to explore the effect and the mechanism of government subsidies on the cost stickiness. Drawing on the ABJ（2003）model, it is found that government subsidies have a positive impact on sticky costs, which persists even after the self-selection. Besides, the relationship between government subsidies 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 subsidies could enhance cost stickiness through management agency problems. There is no evidence to support the viewpoint of adjustment costs and management optimistic expectations. Especially, using cost rate of sales revenue and overinvestment to measure management agency problems, the result of intermediary effects supports the view that government subsidies reinforce cost stickiness through management agency problems. 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 subsidies increasing 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 subsidies 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 the study of government subsidies’ economic consequences.

Culture significantly influences corporate strategic behavior and performance. Based on institutional theory and resource‐based perspective, this study constructs a relational model integrating regional cultural diversity and firms' strategic alliances, knowledge base, and environmental innovation. Using 1081 Shanghai and Shenzhen A‐Shares listed firms (2012–2022) as samples, it conducts multiple regression analysis to examine the effect of regional cultural diversity on firms' environmental innovation, the mediating role of strategic alliances, and the moderating role of the knowledge base. Findings show that regional cultural diversity positively affects firms' environmental innovation, which is mediated by strategic alliances. It also shows that this effect is positively moderated by the breadth of the knowledge base but negatively moderated by the depth of the knowledge base. These findings suggest promoting the protection and integration of regional cultural diversity and accelerating the formation of corporate strategic alliances to enhance firms' environmental innovation capabilities.

Purpose The literature suggests that management discretion to adjust resources in response to changes in sales can create asymmetric cost behavior and management incentives to move stock prices can influence its decision to release management earnings forecasts (MEF). The purpose of this paper is to investigate the association between a firm’s degree of cost stickiness and its propensity to release MEF. The authors propose that both MEF and cost stickiness are influenced by management strategic choices and provide two possible explanations along with supportive evidence. First, when management is optimistic about future performance, it tends to increase both cost stickiness and is willing to disclose the optimistic expectations through MEF. Second, cost stickiness increases information asymmetry between management and investors, thus management tends to issue earnings forecast to mitigate the perceived information asymmetry. Design/methodology/approach The authors collect firm-level fundamental data from the COMPUSTAT database, and market data from the CRSP database during 2005 and 2016. The data used to measure variables related to institutional ownership and financial analysts are, respectively, obtained from the Thomson Reuters and the I/B/E/S databases. The quarterly MEF data are from two databases. The authors obtain the data before 2012 the from Thomson First Call’s Company Issued Guidance database and manually collect the data between 2012 and 2016 from the Bloomberg database for the largest 3,000 publicly traded US companies. The measurement of cost stickiness is based on the industry-level measurement developed by Anderson et al. (2003) and the firm-level measurements developed by Weiss (2010). The authors construct two measurements, management’s propensity to issue MEF and the frequency of MEF, to capture management’s voluntary disclosure strategy. Findings The analyses of a sample between year 2005 and 2016, indicate that the firm-level cost stickiness is positively associated with the firm’s propensity to issue MEF and the frequency of MEF. Moreover, the authors find that the level of cost stickiness is associated with more favorable earnings news forecasted by management. Additional tests suggest that both information asymmetry and managerial optimism may explain the relationship between cost stickiness and MEF. Finally, the authors find that the association between cost stickiness and MEF behaviors is more pronounced when the resource adjustment cost is high and when the firm efficiency is high. The results are robust after using alternative measurements of cost stickiness and MEF. Originality/value First, this paper attempts to build a bridge between managerial accounting and financial accounting by providing evidence of managerial incentives and discretions that affect both cost structure and earnings. The authors contribute to, and complement, prior studies that primarily disentangle the complicated accounting information system by focusing on either the internal information system or the external information system. Second, the paper complements prior studies that examine cost stickiness and its determinants of asymmetric cost behavior by providing additional evidence for the value-relevance of cost stickiness strategy and its link to MEF releases in mitigating information asymmetry. Third, the findings are also relevant to current debates among policymakers, academia and practitioners regarding modernization of mandatory and voluntary disclosures through discussing the managerial incentive behind the managerial disclosure strategies as reflected in MEF releases (SEC, 2013). Fourth, the authors provide evidence regarding management’s role in influencing cost asymmetry and MEF releases, which support the theoretical argument that management discretions affect the firms’ cost structure and MEF disclosures.

Digital transformation and firm cost stickiness: Evidence from China

Based on a sample of cross-border mergers and acquisitions (M&A) by Chinese enterprises in different target countries between 2010 and 2020, this paper explores the impact of cultural differences on M&A performance and the moderating effects of regional cultural diversity and government intervention (financial subsidies) by using event study method and regression analysis. The results indicate that cultural differences have a negative impact on M&A performance. Furthermore, regional cultural diversity and government intervention positively moderate the relationship between cultural differences and M&A performance. This research can assist Chinese companies in fully leveraging regional cultural diversity to mitigate cultural differences and enhance their corporate performance.

In the era of globalization and rapid technological advancement, digital transformation has become a crucial strategy for companies to enhance operational efficiency and competitiveness. Implementing technologies like automation, big data, and artificial intelligence (AI) enables companies to cut expenses and enhance productivity. However, not all companies are able to optimally adjust their cost structures, especially amid market demand fluctuations, such as those experienced during the Covid-19 pandemic. This study aims to analyze the effect of digital transformation and free cash flow on the level of cost stickiness in manufacturing companies, with firm complexity as a moderating variable. The study also considers control variables such as profitability and firm size to provide a more comprehensive analysis. A quantitative approach is employed in this research, utilizing secondary data sourced from the financial reports of manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period 2020 to 2022. A total of 43 manufacturing companies were analyzed. Data processing was carried out using EViews version 10. The results show that digital transformation has a negative effect on cost stickiness. Conversely, free cash flow has a positive effect on cost stickiness, indicating that excess liquidity may lead to higher fixed costs during periods of declining activity. Firm complexity is not proven to significantly strengthen the relationship between the independent variables and cost stickiness, despite being theoretically relevant.

Recent years, a series of policies on environmental information disclosure is issued by relevant management departments. The author compares the data of environmental information disclosure from Shenzhen and Shanghai Stock Exchange between 2006 and 2011, and finds that there is no difference between Shanghai and Shenzhen Stock Exchange in environmental information disclosure level before 2008 and the environmental information disclosure level of Shanghai Stock Exchange is higher than that of Shenzhen Stock Exchange after 2008. For listed companies, the rules on environmental information disclosure of listed companies issued by CSRC(China Securities Regulatory Commission) are more effective than that of Ministry of Environmental Protection. Therefore, the relevant policies for environmental information disclosure of listed companies should be formulated and promulgated by CSRC or formulated and promulgated by both of CSRC and Ministry of Environmental Protection. And this paper also provides empirical evidence to improve the policies design of environmental information disclosure.