Political uncertainty and cost stickiness: evidence from prefecture-city official turnover in China

Purpose The aim of this study is to investigate the impact local political uncertainty on asymmetric cost behavior (i.e. stickiness) for listed firms in China. Design/methodology/approach In study, authors manually collect turnover data prefecture-city officials as a measure exogenous fluctuations and obtain firm-level financial information from China Stock Market Accounting Research (CSMAR) database. To perform analysis, augment traditional stickiness model by including interaction terms official turnover, level control variables. Findings find that leads higher degree stickiness, implying retain slack resources when high. Moreover, effect more pronounced residing regions with weaker institutional environments, are privately owned smaller size. further provide evidence policy threat losing connection two underlying channels. Overall, documents process an important channel influences corporate operational decisions. Originality/value This provides first piece relation between at government level. propose demonstrate channels through which affects firms' behavior.