Abstract
Using a large sample of Chinese listed firms from 2009 to 2019, we investigate whether firms have a target cost structure and how the business cycle (BC) impacts the cost structure’s adjustment speed. The results show that firms have a target cost structure and adjust dynamically with external macroeconomic conditions. The adjustment speed of a firm’s cost structure exhibits a pro-cyclical effect that firms move faster toward optimal cost structure levels in a boom than in a recession. We find that the positive relationship between BCs and the cost structure’s adjustment speed is more significant for non-state-owned enterprises and firms in cyclical industries. In addition, the degree of financing constraints is an important channel through which the BC affects the adjustment speed. This paper provides compelling evidence for firms’ target cost structures and sheds light on the dynamic adjustment of cost structures.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
