Cost Stickiness and Severance Costs: the Moderating Effect of Employee Compensation

Meiyi Lv ()
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Meiyi Lv: Sichuan University

A chapter in Proceedings of the 2025 5th International Conference on Enterprise Management and Economic Development (ICEMED 2025), 2025, pp 243-250 from Springer

Abstract: Abstract This study examines the mechanism through which severance costs affect cost stickiness of enterprise and the moderating role of employee compensation in Chinese private enterprises, grounded in the three foundational theories of cost stickiness and the contract theory. Using the sample of the A-share listed private enterprises from 2008 to 2020, this study implements fixed-effects regression models to analyze the relationship of severance costs cost, cost stickiness and employee compensation. Empirical results demonstrate that severance costs exhibit significant cost stickiness, characterized by asymmetric adjustments where cost reductions during demand declines are smaller than expansions during growth periods, and employee compensation attenuate the positive relationship between severance costs and cost stickiness. These findings contribute to the theoretical understanding of cost management optimization and the evidence-based recalibration of national labor policy frameworks. This study makes dual contributions by both expanding the theoretical boundaries of cost behavior literature and providing actionable organizational-level insights for optimizing employment relationship governance.

Keywords: Cost stickiness; Severance costs; Private enterprises; Contract theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-811-0_25

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DOI: 10.2991/978-94-6463-811-0_25

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