State Ownership and Labor Cost Stickiness: The Role of Free Cash Flows

The purpose of this study is to examine the effect of free cash flows on the relationship between government ownership and labor cost stickiness while providing evidence of how non-economic considerations and socio-political goals influence cost behavior. Unlike other owners, state-owned companies pursue socio-political interests and broader social objectives compared to private firms, which contributes to cost stickiness. The statistical population consists of companies listed on the Tehran Stock Exchange during the period from 2013 to 2022. Companies in the investment, insurance, banking, credit institution, holding, and leasing sectors were excluded due to the specific nature of their activities. Only companies with continuous operations throughout the research period and fiscal years ending in March were included. Ultimately, a final sample of 151 companies, representing 1,498 company-years, was selected. The findings indicate that government ownership positively affects cost stickiness, and free cash flows reinforce the relationship between government ownership and labor cost stickiness. These results suggest that, driven by socio-political interests, state-owned companies pursue broader social goals than private firms, leading to increased cost stickiness