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Policy uncertainty and cost stickiness: Evidence from IPO suspensions in China

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Listed:
  • Xia, Yanchun
  • Dong, Junqi
  • Guo, Shijun

Abstract

This study investigates the impact of policy uncertainty stemming from initial public offering (IPO) suspensions on the asymmetric behavior of selling, general, and administrative (SG&A) expenses. By analyzing the three latest IPO suspensions in China, we find that IPO suspensions increase the stickiness of SG&A expenses. Furthermore, the amplification of SG&A expense asymmetry due to IPO suspensions is more prominent in companies with higher labor intensity, asset intensity, and sales volatility, and among non-state-owned enterprises. Additional analyses reveal that the correlation between policy uncertainty and cost stickiness diminishes once affected companies complete their IPOs and that IPO suspensions result in poorer post-IPO accounting and stock performance. Finally, we find that different IPO pricing regimes do not affect our baseline findings. Collectively, our results suggest that managers retain slack resources during periods of heightened policy uncertainty in the context of IPO suspensions.

Suggested Citation

  • Xia, Yanchun & Dong, Junqi & Guo, Shijun, 2025. "Policy uncertainty and cost stickiness: Evidence from IPO suspensions in China," Economic Modelling, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:ecmode:v:151:y:2025:i:c:s0264999325002147
    DOI: 10.1016/j.econmod.2025.107219
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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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