The role of public-private partnerships in selling, general, and administrative cost stickiness

Figures & data

Table 1. Variables description

Titles	Descriptions for the Test of SG&A Stickiness
lnsgabysgalagt	the log of the ratio of annual selling, general, and administration expenses in year t to the one in year t-1
lnrevbylagrevt	the log of the ratio of annual sales revenue (SALE) in year t to the one in year t-1
DecDummyt	equals one if SALEt < SALEt-1, and zero otherwise.
Decminus1t	equals one if SALEt-1 < SALEt-2, and zero otherwise.
Statet	equal one, if the company is state-owned, zero otherwise.
AIt	asset intensity: the ratio of total assets to sales revenue
EIt	employee intensity: the ratio of the number of employees to sales revenue (in thousands)
FCFt	free cash flow divided by total asset, defined by CSMAR^7
toinstholdt	cumulative number of shares held by institutional investors divided by the total shares outstanding
pctIndept	percentage of independent (outside) directors on the board
Dmbotht	agency issues: if the chairman of the board takes the office of CEO, equal 1, zero otherwise.
constraint	financial constrain: if the KZ of the company is greater than the median of the underlying industry, the variable “constrain” equals 1, zero otherwise. Specifications in footnote 6.
	Characteristics Descriptions for PPP Projects
PPPt	equal 1, if companies posted that PPP contracts had been approved and signed in sample years, zero otherwise.
avePPPtobat	the ratio of PPP investments to government debts in the provinces where participants’ PPP projects locate. If two or more provinces are concerned, the average will be applied.
investtorevt	the ratio of company’s PPP investments to sales revenues
termt	measures PPP projects’ duration in the observation of company year. If there are more than one projects for the company each year, the average of those projects’ duration will be adopted.
noticet	equal 1, if any PPP project of company participants had been assessed as “Paradigm for Practice” by China Ministry of Finance, zero otherwise .
morethan1t	equal 1, if a company participants acquired more than one PPP projects in an observation year, zero otherwise
Yeart	dummy variables for the sample periods in the pool regressions, from the year 2015 to the year 2019
industryt	dummy variables for industry classification set by China SEC. After eliminating financial institutions with code “J”,there are 18 industries in the sample.

Table 2. The statistics of sale revenue and SG&A Cost

Variables	Mean	Standard Deviation	Median	upper quartile	lower quartile
(1) Sale Revenue (RMB in millions)	9590	64,000	1800	4940	747
(2) SG&A Cost (RMB in millions)	920	4460	263	639	124
The ratio of (2) to (1)	22.23%	31%	15.19%	23.46%	9.43%

Table 3. Difference-in-means test for PPP group and others

	PPP = 0 Mean	PPP = 1 Mean	Difference	T value	P value
Revenue (RMB in millions)	9120	44,800	−35,700	−3.4097	Pr(T < t) = 0.0004
SG&A (RMB in millions)	898	2630	−1730	−3.2836	Pr(T < t) = 0.0006
state	0.3166	0.3468	−0.0302	−0.8276	Pr(T < t) = 0.2045
AI	3.1172	3.4320	−0.3149	−1.4772	Pr(T < t) = 0.0706
EI	0.0146	0.0095	0.0051	5.8805	Pr(T > t) = 0.0000
FCF	−0.0011	−0.0232	0.0221	2.3063	Pr(T > t) = 0.0111
toinsthold	0.0519	0.0654	−0.0135	−2.3081	Pr(T < t) = 0.0111
Dmboth	0.2956	0.2096	0.0860	2.7010	Pr(T > t) = 0.0038
	9267	466

Table 4. The Function of PPP on Companies’ Cost Stickiness

	(1)	(2)
VARIABLES	lnsgabysgalag	lnsgabysgalag
lnrevbylagrev	0.519***	0.520***
	(69.35)	(69.08)
lnrevbylagrev* DecDummy	−0.258***	−0.255***
	(−17.88)	(−17.63)
lnrevbylagrev*PPP		−0.0415
		(−0.67)
lnrevbylagrev* DecDummy*PPP		−0.425***
		(−2.77)
PPP		0.0345
		(1.36)
top1nature	−0.0345***	−0.0339***
	(−7.34)	(−7.21)
Decminus1	−0.0657***	−0.0656***
	(−13.71)	(−13.68)
Dmboth	0.0129***	0.0133***
	(2.68)	(2.77)
AI	0.0009***	0.0010***
	(2.77)	(2.85)
EI	0.153	0.161
	(1.21)	(1.27)
FCF	−0.0067	−0.0069
	(−0.81)	(−0.83)
toinsthold	0.0376	0.0350
	(1.13)	(1.05)
pctIndep	−0.0338	−0.0316
	(−0.93)	(−0.87)
year	control	control
industry	control	control
Constant	0.0807***	0.0776***
	(3.57)	(3.43)
Observations	9,733	9,733
R-squared	0.404	0.406
Adj. R2	0.403	0.404

t-statistics in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1

Table 5. The function of PPP on cost stickiness of companies with financial constrains

	constrain = 1	constrain = = 0
VARIABLES	lnsgabysgalag	lnsgabysgalag
lnrevbylagrev	0.402***	0.630***
	(33.90)	(63.19)
lnrevbylagrev* DecDummy	−0.135***	−0.469***
	(−7.18)	(−15.50)
lnrevbylagrev*PPP	0.205*	0.0430
	(1.65)	(0.52)
lnrevbylagrev* DecDummy*PPP	−0.702***	−1.316
	(−3.34)	(−1.01)
PPP	−0.000509	−0.0113
	(−0.01)	(−0.29)
top1nature	−0.0443***	−0.0265***
	(−6.29)	(−4.30)
Decminus1	−0.0723***	−0.0552***
	(−10.26)	(−8.47)
Dmboth	0.0101	0.0174***
	(1.36)	(2.83)
AI	0.0007*	0.0013**
	(1.69)	(2.29)
EI	0.0264	0.370**
	(0.15)	(2.02)
FCF	−0.0351*	−0.0240
	(−1.73)	(−1.22)
toinsthold	0.0378	0.0356
	(0.74)	(0.81)
pctIndep	−0.0428	0.0135
	(−0.78)	(0.29)
year	control	control
industry	control	control
Constant	0.0951***	0.0207
	(2.92)	(0.67)
Observations	4,397	4,891
R-squared	0.323	0.514
Adj. R2	0.318	0.511

t-statistics in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1

Table 6. The Test Results of Mediation Effects on Cost Stickiness

VARIABLES	(1)lnsgabysgalag	(2)lnsgabysgalag
lnrevbylagrev	0.315**	0.571***
	(2.79)	(4.69)
lnrevbylagrev* DecDummy	−0.0733	−0.714*
	(−0.15)	(−2.07)
lnrevbylagrev*avePPPtoba	1.021***
	(6.47)
lnrevbylagrev* DecDummy* avePPPtoba	−2.057**
	(−2.72)
avePPPtoba	−0.161**
	(−3.14)
lnrevbylagrev* investtorev		0.0649***
		(5.20)
lnrevbylagrev* DecDummy* investtorev		0.0434
		(0.11)
investtorev		−0.0363***
		(−5.11)
Decminus1	−0.0475	−0.0397
	(−0.63)	(−0.46)
top1nature	−0.0723	−0.0765**
	(−1.55)	(−2.30)
Dmboth	−0.00113	−0.0172
	(−0.04)	(−0.52)
AI	0.0297**	0.0327***
	(3.19)	(3.81)
EI	1.690	1.864
	(0.61)	(0.90)
FCF	−0.0844*	−0.294**
	(−1.91)	(−2.74)
toinsthold	0.173	0.0659
	(0.20)	(0.09)
pctIndep	−0.282	−0.247
	(−1.33)	(−1.60)
industry	control	control
update	control	control
Constant	0.0415	0.0149
	(0.45)	(0.13)
Observations	466	466
R-squared	0.613	0.610
Adj. R2	0.506	0.498

Robust t-statistics in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1

Table 7. Variables description in additional test

Titles	Description
ARn	The relative change between the degree of variations for production and for demand on quarter basis. Sales revenues and cost of goods sold will be proxy for demands in AR1 and AR2 respectively.
PPP	equal to 1, if companies posted that PPP contracts had been approved and signed in sample years, otherwise zero.
Ardays	natural log of account receivables turnover in days
Apdays	natural log of account payables turnover in days
Invdays	natural log of inventory turnover in days
GM	gross profit /sales revenues × 100%
ROA	net profit/total assets
LEV	total liabilities/total assets
Top1	shareholding ratio for top1 shareholders
SOE	equal to 1, if the company is state-owned, otherwise zero.
cusinfor	1-(top 5 customers revenue divided by total revenue)
suppinfor	1- (purchase from top 5 suppliers divided by total purchase)
lnasset	natural log of total assets
Years	dummy variables for the sample periods in the pool regressions, from the year 2015 to the year 2019
Industries	dummy variables for industry classification set by China SEC. After eliminating financial institutions with code “J“,there are 18 industries in the sample.

Table 8. The effect of PPP on the elasticity between production and demand

	(1)	(2)
VARIABLES	AR1	AR2
ppp	−0.0290	−0.0705**
	(−0.62)	(−2.16)
Ardays	−0.0589***	−0.0419***
	(−8.16)	(−8.28)
Apdays	−0.0700***	−0.0486***
	(−6.05)	(−6.03)
Invdays	0.0914***	0.0888***
	(10.94)	(15.45)
GM	0.0043***	0.0009**
	(7.56)	(2.18)
ROA	−0.0047***	−0.0005
	(−2.82)	(−0.39)
LEV	0.0011**	0.0009***
	(2.42)	(2.61)
top1	−1.33e-05	−5.86e-05
	(−0.03)	(−0.18)
SOE	−0.0581***	−0.0403***
	(−3.57)	(−3.53)
lnasset	0.0025	−0.0041
	(0.35)	(−0.82)
update	control	control
Iindustry	control	control
Constant	0.991***	1.000***
	(6.22)	(9.00)
Observations	9733	9733
R-squared	0.044	0.033
Adj. R2	0.0422	0.0312

t-statistics in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1

Table 9. The effect of PPP project duration on cost stickiness

	Stage One	Stage Two
Independent Variables	notice	lnsgabysgalag
lnrevbylagrev		1.3402***
		(4.65)
lnrevbylagrev* DecDummy		−2.5792
		(−1.59)
lnrevbylagrev*term		−0.0474***
		(−3.22)
lnrevbylagrev* DecDummy*term		0.1118**
		(2.18)
term		0.0092***
		(3.34)
Morethan1	0.6239**
	(1.95)
Decminus1	control	control
top1nature	control	control
Dmboth	control	control
AI	control	control
EI	control	control
FCF	control	control
toinstholdper100	control	control
pctIndep	control	control
Intersect	control	control
Number of Samples	466	466
Wald chi2	146.86
lambda	0.1328*** (2.52)

Robust z-statistics in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1