Cost Stickiness and Firm Performance: Evidence from Manufacturing Enterprises in China

Abstract

Understanding how costs behave relative to changes in activity is crucial to improving managerial decision-making and financial performance. This study investigated the relationship between cost stickiness and firm performance among manufacturing enterprises in China. Cost stickiness occurs when costs rise more quickly with an increase in sales but decrease more slowly when sales decline. Employing a descriptive–correlational design, the study used secondary financial data from 50 listed manufacturing firms over a five-year period (2018–2022). Results indicated that administrative, selling, and operating expenses exhibited significant stickiness (ranging from β = –0.35 to –0.12), and cost stickiness was negatively correlated with profitability (ROA: r = –0.47, p < 0.01). The findings highlight the importance of flexible cost management and managerial adaptability for sustaining firm performance under volatile market conditions.