Marketization Level，Debt Maturity and Expense Stickiness of Chinese Listed Companies: Analysis Based on Fixed Effect Model

Abstract

Expense stickiness is the phenomenon that the marginal rate of change of expense is different when the volume changes in different directions. It can be regarded as a form of agency cost. Both the debt financing and the external environment of the companies are important corporate governance mechanism and can play a role of inhibition on agency cost. With the data of listed companies from Shanghai Stock Exchange(SSE) and Shenzhen Stock Exchange(SZSE) in China, this paper finds that expense stickiness exists in the listed companies in China. We also observe that the shorter listed companies’ debt maturity can inhibit the cost stickiness. At last, this paper shows that the lower marketization level of the place the listed companies are located in, the stronger the debt maturity’s inhibiting effect on expense stickiness is. This result also suggests the substitution between the debt maturity and the marketization level. Strengthening cost management and rationalizing the maturity of debt are two important issues of Chinese companies. Hence, putting cost stickiness and debt maturity into a research framework has a significant guiding meaning.

Keywords: Marketization level；Debt maturity；Expense stickiness；Fixed effect model