The impact of state-owned capital on labor cost stickiness in private firms: Evidence from China

This paper extends prior literature on cost behavior by providing evidence of whether and how access to public financing affects the degree of SG&A cost stickiness. Based on a comprehensive dataset covering both public and private firms in Korea, we document that the degree of cost stickiness is, in general, greater for private firms than it is for public firms. Furthermore, we identify four candidate mediators for the association between listing status and cost stickiness: demand uncertainty, financial risk, reporting incentives, and ownership wedge. Mediation analyses reveal that demand uncertainty mainly accounts for the difference in cost stickiness between private and public firms. This finding suggests that public firms better address uncertainty by diversifying idiosyncratic risk in the capital market than private firms do and hence exhibit lower asymmetry in SG&A costs. Overall, we present evidence that access to equity financing influences operations and consequently affects cost behavior.

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.

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.

Cost control is essential to enterprises' profits. Since the foreign scholars found that the existence of cost stickiness, the problem has become a hot topic of scholars, and more and more business managers pay attention to. The study of cost stickiness helps managers to deepen their understanding of the cost behavior of the firm, thus implementing more effective control. The causes of cost stickiness are mainly subjective adjustments to cost costs by managers, and the different background of the managers and the nature of the property rights of the enterprises may affect the manager's cost management decision. Therefore, this article distinguishes between state-owned enterprises and non-state enterprises, from the perspective of the characteristics of managers to explore the impact of cost sticky. Based on the analysis of principal-agent theory and high-level ladder theory and the results of domestic and foreign research, this paper investigates the influence of managers' background characteristics on cost stickiness as a research sample from Shanghai and Shenzhen A-share manufacturing listed companies in 2009 and 2015, and further, this paper analyzes the differences between the background characteristics of state-owned enterprises and non-state-owned enterprises managers on the cost stickiness. This study found that China's manufacturing companies do exist in the cost of sticky, the cost of state-owned enterprises is stronger than non-state enterprises. In non-state-owned enterprises, age and tenure have a significant inhibitory effect on cost stickiness, and education has a significant effect on cost stickiness. In state-owned enterprises, the degree of age-to-cost cohesion is equal to that of non-state enterprises, and the effect of reinforcement on cost stickiness is weaker than that of non-state enterprises, but the term has no significant effect on cost stickiness. At the same time, executives' financial experience has had no significant impact on cost stickiness in both state and nonstate enterprises. This study not only enriches the background of manager's background on the study of cost sticky research, but also has some reference for the selection of senior management.

This study examines the impact of COVID-19 on operating cost stickiness in Chinese firms, utilising fixed-effects regression analysis of A-share listed companies from 2012 to 2021. The findings reveal that the pandemic significantly reduced cost stickiness across these firms. Heterogeneity analysis indicates a pronounced decrease in cost stickiness among non-state-owned enterprises (non-SOEs), in contrast to a more modest decline in state-owned enterprises (SOEs). The manufacturing sector experienced a more substantial reduction in cost stickiness than the non-manufacturing sector. Additionally, the analysis suggests that the pandemic heightened managerial pessimism in both SOEs and non-SOEs; however, this sentiment notably influenced cost stickiness only in non-SOEs. Overall, the management expectations theory elucidates the significant reduction in cost stickiness in non-SOEs, while the political connection theory accounts for the relatively limited impact observed in SOEs.

Using Chinese-listed enterprise data from 2010 to 2021, we study the relationships among enterprise digital transformation, managerial myopia and cost stickiness. The results show that enterprise digital transformation inhibits cost stickiness, including operating cost stickiness as well as selling, general and administrative (SG&A) cost stickiness. This result holds after various robustness and endogeneity tests. Additionally, mechanism research indicates that enterprise digital transformation inhibits cost stickiness by reducing adjustment costs (ACs) and alleviating financing constraints (SAs). However, managerial myopia negatively affects the inhibition of enterprise digital transformation on cost stickiness by increasing ACs and aggravating SAs. Furthermore, the relationship between enterprise digital transformation and cost stickiness is stronger for mature, state-owned and high-tech enterprises than for those with better digital economy policy environments.

In recent years, all sectors of society have achieved good results in promoting the supply-side structural reform. Significant progress was made in real estate destocking, excess capacity in coal and steel was cut, and the macro leverage ratio was basically stable. But it is slightly insufficient in “reducing costs and improving weak links”. Especially in “reducing costs”, there is still a huge room for improvement.Only by combining the macro-level “reducing costs” reform with the demand-side reform of micro market entities, can the optimal allocation of resources be realized and the purpose of lowering costs be achieved. In the practice of enterprise cost control, the phenomenon of “cost stickiness” is a manifestation of high cost. The existence of cost stickiness not only means that when the business volume increases, the input of enterprise production factors may be greater than its actual demand, resulting in excessive cost expenditure, but also means that when the business volume decreases, the input of human, material and financial resources does not decrease correspondingly, resulting in resource waste. Therefore, the analysis of the resource consumption ratio in the production and marketing process of Chinese enterprises, and the analysis of the key factors to reduce corporate costs, have practical value and theoretical significance for solving effective supply and releasing corporate vitality.In this paper, we use A-share listed companies from 2013 to 2016 as the research samples, and explore the impact of “Internet Plus” on the cost stickiness of enterprises and the channels of their action. The empirical study finds that, in general, “Internet Plus” has a restraining effect on the cost stickiness of enterprises. This restraining effect is more significant in the sample group with higher asset specificity, greater environmental uncertainty and lower management discretion. The above regression results show that “Internet Plus” will affect the cost stickiness of enterprises by reducing the adjustment cost of enterprises and alleviating the optimistic expectations of management. Further research finds that: （1） The restraining effect of “Internet Plus” on cost stickiness has a certain continuity. （2） To distinguish the different cost elements, “Internet Plus” restraining the cost stickiness of material resources is greater than the cost stickiness of human resources. （3） In the sample with lower asset specificity and less environmental uncertainty, “Internet Plus” aggravates the cost stickiness, and this kind of aggravating effect only exists in the sample group with low internal control quality. The findings of this study mean that the aggravating effect of “Internet Plus” on cost stickiness exists at the present stage, but the aggravating effect of “Internet Plus” on cost stickiness will be weakened with the improvement of various constraint mechanisms and governance systems of enterprises.The conclusions not only provide a new understanding of how “Internet Plus” affects the cost stickiness of enterprises, but also help to provide policy recommendations for promoting the supply-side structural reform from the perspective of “reducing costs”.

The problem of cost stickiness refers to that when the enterprise's income decreases, the range of cost decrease will be smaller than that of the same proportion when the enterprise's income rises, which makes the enterprise face greater risks when the income decreases. In recent years, the mixed ownership reform of state-owned enterprises has been advancing steadily, which has enhanced the competitiveness and vitality of state-owned enterprises. However, the research on the impact of mixed ownership reform on the phenomenon of corporate cost stickiness is still not in-depth. This paper studies the A-share state-owned listed companies in Shanghai and Shenzhen from 2016 to 2019 using OLS model to explore whether there is cost stickiness and whether the promotion of mixed reform can inhibit the cost stickiness. It is found that there is a problem of cost stickiness in state-owned enterprises. At the same time, with the increase of non-state-owned shareholders' shareholding ratio, the problem of cost stickiness has been alleviated to a certain extent. This paper makes up for the relevant blank, and proves that the mixed reform has positive economic effect from the perspective of reducing cost stickiness.

Purpose: While research on cost stickiness has predominantly focused on large public companies, the variability in results has cast doubt on the generalizability of sticky cost behavior to all companies. This paper investigates whether cost sticki-ness is observable in smaller private companies – i.e., firms without publicly traded securities – thus addressing a notable gap in the literature. Design/methodology/approach: This study adopts the empirical framework of Anderson et al. (2003), using data from private Italian firms from 1998 to 2022. Furthermore, it extends the scope of analysis to include such diverse cost catego-ries as selling, general, and administrative (SG&A) costs, total labor cost, purchase costs, rent costs, and other operating expenses. Findings: The findings indicate that SG&A costs in private firms are significantly less sticky than those reported for large public firms. Cost stickiness is also ob-served in labor, rent, and other operating costs but not in purchase costs. Notably, cost stickiness varies across industries. Originality/value: This study sheds new light into the dynamics of cost stickiness by highlighting how asymmetrical cost behavior in small and medium-sized pri-vate companies differs from that in large public companies, enhancing the under-standing of cost management practices across business contexts.

Recent policy discussions have debated whether governments should treat state-owned and private enterprises equally or adopt different policies towards each type of enterprise. Such questions are pertinent for difficult economic climates in which government subsidy towards struggling state-owned enterprises seems natural, given their fundamental state-supported structure. However, should the government in turn also offer subsidies to the private sector, and how large should the subsidy be? We analyze this question in a mixed oligopoly setting, in which the government can award subsidies of different amounts to state-owned and competitive private enterprises, respectively. In a setting in which the state-owned enterprise seeks to maximize a weighted sum of social welfare and their own profits while private enterprises maximize their own profits, we find that the optimal subsidy policy is equal treatment of the different types of firms, regardless how much weight the state-owned enterprise puts on social welfare. The result suggests that equal subsidizing treatment of state-owned and private firms may be the socially efficient policy, regardless of the differences in objectives between the state-owned and private enterprises, as long as all firms share the same production technology. We show that our result is also robust to the functional form of production technology, the functional form of market demand, the composition of different types of firms in the market, and the heterogeneity of the objectives of firms. Finally, we show that heterogeneous cost structures among firms yields non-uniform optimal subsidy among the firms, and solve for the subsidy as a function of each firm's socially optimal production level.

Background There is a “service-oriented paradox”, which inhibits the performance in the process of service-oriented due to the rise of operating costs and other problems. There are few studies on how service-oriented affects the cost of manufacturing enterprises. The analysis of the potential market emotional micro behavior under the service-oriented paradox is also one of the contents of this article. Subjections and Methods Non ST manufacturing companies listed on A-shares in Shanghai and Shenzhen, China from 2007 to 2019 were selected as samples, and the OLS method was used to study the impact of service level on cost stickiness, as well as the two impact mechanisms of management psychological expectation and resource adjustment cost in the sample of 4826 company years, and the intermediary effect test was used for analysis. In addition, a questionnaire survey is also used to investigate the emotional micro behavior of non ST manufacturing companies listed on A-shares in China. The Chinese version of cognitive emotion regulation scale revised by Wei Yimei in 2008 was used in this study. The scale is a self-report scale, which requires individuals to self-evaluate the cognitive emotion regulation methods used in experiencing negative life events. The scale has 32 items, including 8 cognitive coping strategies, including self-blame, tolerance, reflection, positive adjustment, positive imagination, self-comfort, disaster and blaming others. This scale is divided into adaptive and non adaptive cognitive emotion regulation methods. Adaptive strategies are tolerance, positive adjustment, positive imagination and self-comfort. Non adaptive strategies are self-blame, reflection, disaster and blaming others. The questionnaire adopts the 5-point scoring method (1-5, from “almost never” to “almost always”). The higher the score on a subscale, the more likely the subjects are to use this cognitive strategy. The internal consistency coefficient of the total scale is 0.89, of which the internal consistency coefficients of the eight sub scales are 0.72, 0.68, 0.70, 0.66, 0.81, 0.60, 0.81 and 0.76 respectively. The internal consistency coefficient of the scale in this study is 0.839. Results the research shows that with the improvement of service level, the Cost Stickiness of manufacturing enterprises first decreases and then increases, that is, first according to product stickiness and then according to service stickiness. Mechanism research shows that in the early stage of service-oriented, managers' psychological expectations tend to be cautious and optimistic, unwilling to hold more resources, so as to reduce cost stickiness; In the later stage of service-oriented, managers' psychological expectations are often too optimistic and tend to hold more resources, which increases the Cost Stickiness; Under this psychological effect, managers tend to allocate lower adjustment costs in the early stage of service-oriented, so as to reduce cost stickiness; In the later stage of service-oriented, they tend to allocate high adjustment cost resources and enhance the Cost Stickiness in the later stage of service-oriented. Further research shows that made in China 2025 and state-owned enterprises strengthen the relationship between service level and cost stickiness. In addition, in the process of the impact of financial events on anxiety, emotional response plays an intermediary role, and psychological elasticity plays a regulatory role. Financial events are regulated by psychological elasticity through the intermediary effect of emotional response on anxiety. That is, the higher the psychological elasticity, adjust the impact of financial events on anxiety through coping styles and reduce it; On the contrary, the lower the level of psychological elasticity, adjust the impact of financial events on anxiety through coping styles, and increase it. Conclusion under the influence of managers' psychological expectation and resource adjustment cost, there is a U-shaped relationship between the service level of manufacturing enterprises and cost stickiness. The study also lacks the impact of different service types on Cost Stickiness. The research results help manufacturing enterprises understand the change law of cost allocation in the process of service-oriented, and have strategic value in promoting the implementation of made in China 2025. At the same time, the scientific use of different enterprise strategies according to the emotional micro changes in different regions should also become the scope of consideration of the manufacturing industry. Acknowledgements Tianjin Municipal Philosophy and Social Science Planning Project Youth Project: “Research on the Impact of Servitization on Cost Stickiness in Chinese Manufacturing Enterprises” (TJGLQN18-006); Tianjin Municipal Education Commission Social Science Major Project: “Research on Cost Sharing Mechanism of Postgraduate Training” (2020JWZD05).

Cost Stickiness means that costs increase more rapidly with an activity increase than they decrease with an activity decrease. This paper focuses on Chinese A-shares listed companies, which implement private equity placement from 2007 to 2016, to study the impact of earnings management motivation of private equity placement on listed companies’ cost stickiness. The results show that the listed companies implementing private equity placement have positive motivation of earnings management, and will cut more costs when the operating income declines, thus weakening their cost stickiness. Further tests find that this weakened effect is more obvious in the state-owned enterprises, and less obvious in the enterprises audited by the big-four.

From different perspectives with supplier relationships as the entry point, this paper explores the impact of external enterprises on the cost stickiness of listed companies based on the data of listed manufacturing companies in Shanghai and Shenzhen from 2016 to 2019. The results show that when the main suppliers are the associated companies of the listed company, the suppliers’ correlation degree and the influence of the associated suppliers will significantly reduce the cost stickiness, while the suppliers’ volatility degree will significantly increase the cost stickiness. Further researches show that in the samples with high environmental uncertainty, associated suppliers can exert more cooperative effects. State-owned enterprises can better deal with the cooperative relationship with associated suppliers, thus reducing cost stickiness. This study enriches the related research on the correlation relationship of supply chain to cost stickiness. Under the current background of economic transformation and upgrading, choosing the right supplier relationship can effectively deal with the negative impact of environmental uncertainty, reflecting the “alliance effect”.

After the implementation of reform policy in 1978 and the successful transition of planned economy to a market economy in 1992, China has established various types of enterprises including state-owned enterprises, collective ownership enterprises, private enterprises and foreign-funded enterprises. Among them, state-owned and private enterprises are significantly different in terms of size, organizational structure, human resources management, employment stability and compensation. This study aims to investigate the effects of extrinsic(money, benefits) and intrinsic(job) rewards on organizational effectiveness(job satisfaction and work effort) among the private and state-owned enterprises in China. Moderating roles of enterprise types(state-owned and private enterprises) and distributive justice between the two types of rewards and organizational effectiveness were also examined. Survey data from 403 Chinese employees(215 private firms, 188 state-owned enterprises) were tested using hierarchical regression analysis, which confirmed significant effects of extrinsic and intrinsic rewards on both job satisfaction and work effort. Intrinsic rewards had a stronger effect than extrinsic rewards on both job satisfaction and work effort. Furthermore, enterprise types were found to moderate the relationship between intrinsic rewards and job satisfaction, extrinsic rewards and work effort as well as between intrinsic rewards and work effort. Specifically, extrinsic rewards had a stronger effect on work effort in state-owned enterprises(than private firms), intrinsic rewards had a stronger effect on job satisfaction in state-owned enterprises(than private firms), and intrinsic rewards had a stronger effect on work effort in private firms(than state-owned enterprises). Moreover, distributive justice moderated the relationship between extrinsic/intrinsic rewards and organizational effectiveness. To be specific, extrinsic rewards had a stronger effect on both job satisfaction and work effort among the group with high distributive justice, while intrinsic rewards had a stronger effect on work effort among the group with low distributive justice. Distributive justice is about extrinsic rewards such as pay, thus the group with high distributive justice is more likely to be attracted by extrinsic rewards, while the group with low distributive justice tends to be motived by intrinsic rewards. Therefore, intrinsic rewards could maximize work effort in the case of low distributive justice. According to cognitive evaluation theory, extrinsic rewards such as pay will reduce intrinsic motivation in a work. In other words, when people are paid for work, it feels less like something they want to do and more like something they have to do. Thus, intrinsic rewards couldn’t function well in the case of high distributive justice because of the extrinsic rewards and the effect of intrinsic rewards on work effort will decrease accordingly. This study implies that Chinese enterprises need to provide intrinsic rewards as well as extrinsic rewards. The intrinsic rewards that fit Chinese reality are the establishment of learning organization and psychological awards such as “advanced workers”, “technical expertise”, “innovation award”, and “energy-saving award”. State-owned enterprises were inferior to private firms in rewards, distributive justice and work effort. These are all due to the equal reward systems in state-owned firms, and this “average prize” refers to the Chinese Confucian ideology “Do not suffer from oligopoly and suffer from uneven, not suffering from poverty and suffering from anxiety”. State-owned enterprises should increase pay level(extrinsic rewards) for top talents to avoid their turnover. Furthermore, state-owned enterprises need to use scientific indicators to evaluate the performance of CEOs and to select qualified CEOs who used to be dispatched by Chinese government.

Cost stickiness is one of the operating characteristics of enterprises. In the current research literature on the economic consequences of cost stickiness, there is little literature on the relationship between cost stickiness and the possibility of future losses and audit costs. Based on the sample data of Shanghai and Shenzhen A-share listed companies, this paper studies the correlation between cost stickiness and the possibility of future losses, cost stickiness and audit costs. The study found that the greater the cost stickiness of the enterprise, the greater the possibility that the enterprise will suffer losses in the future; and the audit costs will increase as the cost stickiness of the enterprise increases. Further research finds that, compared with non-state-owned enterprises, the cost stickiness of state-owned enterprises has a smaller impact on the possibility of future losses of the enterprise; under different ownership properties, the effect of cost stickiness on audit costs has no significant difference. After the robustness test, the conclusion still holds. This research conclusion helps companies to see more clearly the impact of cost stickiness on business performance, helps CPAs increase their awareness of the risk of cost stickiness, and helps policy regulators realize the importance and necessity of “cost reduction” in “reducing one supplement” and strengthening implementation.