Does access to capital affect cost stickiness? Evidence from China

Abstract

We study the effect of limited access to capital on firm cost stickiness, using data from a large sample of Chinese private firms over 1998–2007. Our results show that on average SG&A costs are anti-sticky. For firms in regions with lower levels of financial development, SG&A costs have lower sensitivity to sales increases and exhibit lower stickiness. Overall our findings suggest access to capital as an important determinant of cost stickiness.