Research on the Influence of Free Cash Flow and Board Governance on the Stickiness of Expenses in State Owned Enterprises under Mixed Reform

DOI: https://doi.org/10.62517/jtm.202413102

Author(s)

Wei Liang*, Qiufei Wang

Affiliation(s)

School of Management, Shenyang Jianzhu University, Shenyang, Liaoning, China * Corresponding Author.

Abstract

The economy has flourished since China’s reformation and opening up, as it has progressively intensified and thoroughly reformed businesses owned by the state. In recent years, the reformation of businesses with mixed ownership has been central to numerous guidelines and the focal point of that of enterprises owned by the state. The reformation of board governance brought about by this hybrid reform is crucial to enhancing the efficacy of state-owned enterprise governance. As one of corporate governance’s crucial elements, board governance will have a certain impact on cost control. Based on the adjustment ABJ expense stickiness test model, this paper empirics studies how the board of directors controls and supervises the management's self-interested behavior on free cash flow resources through the governance structure, thus affecting expense stickiness. The findings indicate that cost stickiness exists in companies owned by the Chinese government and undergoing mixed reformation. Free cash flow can enhance the stickiness of expenses. In the case of abundant free cash flow, improving board governance has the effect of restraining the stickiness of expenses. The outcomes of the research have significant policy implications to enhance the conversion and improvement of businesses owned by the state and the progression of high-quality enterprises.

Keywords

Mixed Reform of State-owned Enterprises; Expense Stickiness; Board Governance; Free Cash Flow

References

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