Chairman individualism and cost structure decisions

Abstract

ABSTRACT Taking a chairman’s native place of origin in Northern (Southern) China as a proxy for chairman individualism (collectivism), this paper examines how such individualism affects firms’ cost structure decisions within a sample of Chinese listed firms. The results show that individualistic chairmen tend to choose a rigid cost structure. Further analysis shows that this relationship exists only in non-state-owned enterprises, when the board has a low level of independence, and when the firm has a low level of financial leverage. This paper contributes to the literature on firms' cost structure decisions in response to risk and on the effect of managerial individualism (collectivism) on corporate strategic cost management. Moreover, this paper provides implications for Chinese firms to realise the advantages of strategic cost management through managers' leadership roles and to achieve transformation and sustainable development.