Director Network Connections and Corporate Cost Decisions

As economic development deepens, cost decisions play an increasingly prominent role in promoting corporate growth and sustaining economic expansion. From a social network perspective, this study examines the impact of director network connections on corporate cost decisions using a sample of Chinese A-share listed firms from 2008 to 2023. The findings reveal that: (1) Overall, increased director network centrality is associated with a significant reduction in corporate cost stickiness. (2) After categorizing cost types, director network connections exhibit a more pronounced inhibitory effect on operating cost stickiness. When distinguishing between director types, the governance role of director network connections is primarily driven by non-independent directors, while the influence of independent directors is relatively limited. (3) Mechanism analysis indicates that director network connections primarily mitigate cost stickiness by strengthening reputation constraints and alleviating industry information asymmetry. (4) Further tests demonstrate that the inhibitory effect is more significant in firms with larger size and higher separation of ownership and control. Additionally, director network connections do not significantly alter the structural uniqueness of corporate costs or revenues but notably enhance cost adjustment elasticity. This study extends the exploration of the determinants of cost stickiness from the perspective of social connections and enriches empirical evidence on the influence of director characteristics on corporate cost decisions.