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This paper examines the impact of managers’ stock incentives on changes in sales and selling, general, and administrative (SG&A) costs, which can help determine whether SG&A costs are sticky or non-sticky. This study employs two criteria for assessing managers’ incentives: managers’ wealth sensitivity to stock price changes (Delta) and managers’ wealth sensitivity to stock returns (Vega). The first hypothesis posits that Delta influences cost stickiness, leading to a more significant cost increase in response to rising sales compared to decreasing sales. Conversely, the second hypothesis suggests that Vega directly affects non-sticky costs, whereby costs increase less in response to growing sales than decreasing ones. The statistical sample for this study comprises 138 companies from 2008 to 2023. A panel regression model was utilized to test the hypotheses, revealing that Delta significantly positively affects cost stickiness, while Vega has a significant negative effect.

This paper examines the impact of managers' stock incentives on changes in sales and selling, general, and administrative (SG&A) costs, which can help determine whether SG&A costs are sticky or non-sticky. This study employs two criteria for assessing managers' incentives: managers' wealth sensitivity to stock price changes (Delta) and managers' wealth sensitivity to stock returns (Vega). The first hypothesis posits that Delta influences cost stickiness, leading to a more significant cost increase in response to rising sales compared to decreasing sales. Conversely, the second hypothesis suggests that Vega directly affects non-sticky costs, whereby costs increase less in response to growing sales than decreasing ones. The statistical sample for this study comprises 138 companies from 2008 to 2023. A panel regression model was utilized to test the hypotheses, revealing that Delta significantly positively affects cost stickiness, while Vega has a significant negative effect. [ABSTRACT FROM AUTHOR]

Copyright of Çankırı Karatekin University Journal of the Faculty of Economics & Administrative Sciences is the property of Cankiri Karatekin University, Faculty of Economics & Administrative Sciences and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Long-term growth expectations refer to the expected activity and company profitability. These expectations affect managers' decisions about changing resources and cost behavior. This research aims to study the capital market's reaction to the cost asymmetric behavior of long-term growth expectations. The sample includes 155 firms admitted to the Tehran Stock Exchange from 1394 to 1400. Multiple regression models have been used to test the hypotheses. The findings show that, in firms with high versus low long-term growth expectations, cost stickiness is more asymmetric. Also, the findings showed that the capital market reacts negatively to unexpected cost stickiness. Also, investors react more negatively to unexpected cost stickiness for a firm with high long-term growth expectations than for one with low ones. Managers' economic motives are one of the main drivers of asymmetric cost behavior. Firms that expect higher future growth rates tend to reduce the risk of idle capacity by increasing investment. Investors also revise their evaluations in case of an increase in unexpected cost stickiness. This study adds to the literature on management accounting and capital markets. It documents the market's reaction to asymmetric cost behavior. It also links this cost behavior, a key area of management accounting, to investors' actions in the capital market.

Purpose – A country’s institutional environment influences every facet of its business. This paper aims to identify institutional factors (state ownership, government attention on employment and employees’ educational background) that affect the asymmetric cost behavior in China. Design/methodology/approach – Using 2,570 listed firms’ data between 2002 and 2015, we use empirical models to explore the effects of state ownership, government attention on employment and employees’ educational background on the asymmetric cost behavior in China. Findings – This study found that the asymmetric cost behavior of central state-owned enterprises (CSOEs) is greater than local state-owned enterprises (LSOEs). Meanwhile, the empirical results show that government attention on employment is reflected in five-year government plans, and employees’ educational backgrounds are positively associated with asymmetric cost behavior. Originality/value – This study contributes to the economic theory of sticky costs, institutional theory and asymmetric cost behavior literature by providing evidence that shows how government intervention and employee educational background limit the flexibility of corporate cost adjustments. Additionally, this study provides guidance to policymakers by showing how government long-term plans affect firm-level resource adjustment decisions.

This study examines whether intellectual capital efficiency affects the asymmetric cost behavior of managers and whether such influences were impacted by the COVID-19 pandemic in Australia and China. The sample consists of Australian and Chinese-listed firms from 2018 to 2021. The results found that intellectual capital efficiency increases the cost stickiness in general for both countries. However, the degree of cost stickiness caused by intellectual capital efficiency is significantly more pronounced in Australia than in China. When Chinese firms have government connections, the degree of cost stickiness caused by the intellectual capital efficiency increases and the significant difference in cost stickiness between China and Australia ceases. In addition, this study found that COVID-19 affected the degree of cost stickiness in China more profoundly than in Australia. This study presents important implications for external stakeholders to assess a firm's cost behavior by considering a firm's intellectual capital efficiency as the determinant of asymmetric cost behavior. [ABSTRACT FROM AUTHOR]

The management accounting literature traditionally focuses on the economic explanation of asymmetric cost behavior. While non-economic considerations likely also a role in explaining resource adjustment decisions. The socioemotional wealth perspective refers to non-financial aspects such as the identity and ability to exercise influence of the owners that satisfy the emotional needs of the family owners. In this regard, the cost behavior of family firms is the result of non-economic goals such as protecting the socioemotional wealth of family owners, and these goals will lead to asymmetric cost behavior. The purpose of the present research is to examine the asymmetric cost behavior in family companies according to the socioemotional wealth perspective. In this regard, the data from 154 firms listed on Tehran Stock Exchange during the period from 2016 to 2021 has been used. Hypotheses have been tested using multivariate regression models. The findings indicate that family firms have greater costs than non-family firms. In addition, the findings showed that family firms with a high percentage of family ownership and family CEOs have more cost stickiness than non-family firms. On the other hand, the presence of a high proportion of family managers on the board does not lead to an increase in the cost stickiness of family firms compared to non-family firms. Understanding how family firms adjust their costs in response to changes in demand is useful for investors and analysts who forecast the future earnings and cash flows of these firms. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Marmara University Social Sciences Institute / Öneri is the property of Marmara University, Institute of Social Sciences and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study examines the relationship between tax avoidance and asymmetric cost behavior. This relationship arises due to direct economic benefits of cash savings from tax avoidance. On one hand, cash savings from tax avoidance may prompt managers to retain excess resources when activity goes down. On the other hand, tax avoidance may alleviate managers' concerns about adjustment costs due to cost reductions in sales downturns. Using a large sample spanning the 1993-2013 period, we document a significantly negative relationship between tax avoidance, proxied by cash effective tax rate, and asymmetric cost behavior. The result suggests that asymmetric cost behavior is less pronounced when tax avoidance is higher. We further find that this relationship varies with firms' business strategies, cash flow volatility, and tax fees paid to the auditor. This study advances the understanding of accounting researchers on the relationship between tax avoidance and managers' resource adjustment decisions. [ABSTRACT FROM AUTHOR]

Asymmetric cost behavior refers to the different response of variable costs in case of an increase or decrease in the level of the company's operating activity due to managerial commitment decisions to preserve unused resources when the volume of activity decreases. The purpose of this research is to H! aeg statistical sample of teseac durrng ؛the years 2٥11 ٠٠لالا 23 Te results of the test of the research hypotheses indicate that financing has a significant and opposite effect on the asymmetric behavior of cost. Also, it can be inferred that in companies that do not have weak internal control, the relationship between financing and stickiness of the total cost of goods sold and administrative, general, and sales costs are reduced, so the company's internal quality control plays an effective role in managing asymmetric cost behavior. Also, the results showed that better governance mechanisms play an effective supervisory role in controlling managers' motivations. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Accounting & Auditing (2314-4793) is the property of Beni Suef University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Journal of Accounting & Auditing (2314-4793) is the property of Beni Suef University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Objective: In this study, the role of state ownership in comparison to private ownership on the asymmetric behavior of costs has been investigated.Method: In order to conduct this research, sample of 325 companies listed in the Tehran Stock Exchange and Iran Fara Bourse (1990 firm-year) were selected during the period 2010-2020. Selling, general & administrative costs and, at a higher level, operating costs have been evaluated as dependent variables of the model. Hypotheses were tested using panel data and multiple regression model with ordinary least squares method and robust standard error approach.Results: State ownership compared to private ownership leads to greater stickiness in selling, general & administrative costs and total operating costs.Conclusion: In the state-owned enterprises due to government support, prioritizing socio-political objectives and intervention in the decision-making process, the degree of cost stickness is higher, because downward adjustments in costs such as employee adjustments and changes in resources level is lower than other firms. Management expectations in conjuction with government support (such as optimism about future demand) and their incentives (such as opportunism and empire building) are other reasons for higher degree of cos stickness of state-owned enterprises in comparison with private-owned enterprises.

Copyright of Financial & Business Studies Journal / Maǧallaẗ Al-Dirāsāt Al-Māliyyaẗ wa Al-Tiǧāriyyaẗ is the property of Beni Suef University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Managers think that retaining resources is more effective than rebuilding resources after exhausting them. However, financing constraints have brought great uncertainty to this resource decision-making implemented by managers. Data of manufacturing listed firms in China from 2009 to 2017 are used here to explore the impact of financing constraints on cost stickiness. This paper finds that internal financing constraints have a significant promoting effect on cost stickiness, while debt financing constraints and equity financing constraints have a significant restraining effect on cost stickiness. The internal control quality has a moderation effect on this relationship. In a firm with low quality of internal control, internal financing constraints can enhance cost stickiness, but the weakening effect of external financing on cost stickiness is not affected by internal control quality.

The study aimed to identify how information about the asymmetric behavior of costs can be used to analyze the costs of competitors in the apparel segment. Anderson, Banker and Janakiraman (2003) model was used to identify the cost behavior of the five companies analyzed in the period from 2010 to 2019 and, later, a regression model with panel data was carried out to investigate the influence of the asymmetric behavior of costs on the performance of companies. The results showed that companies with asymmetric behavior (antisticky) presented a lower performance (measured by gross margin and EBITDA) in relation to those with symmetrical behavior of costs, even with lower participation of costs and fixed expenses in the cost structure. This result contributes by highlighting the importance of monitoring information on asymmetric behavior of costs in the analysis of competitors' costs, especially in relation to the cost structure, since they can influence the expected result. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between corporate financialization and asymmetric cost behavior using the Chinese listed companies over the period of 2009–2017. To examine the heterogeneous impacts of corporate financialization on asymmetric cost behavior, the paper analyzes the subsamples classified by different internal controls, compensation incentives, and agency problems. The multiple linear regression is used to test the research hypothesis. The research finds a negative relationship between corporate financialization and asymmetric cost behavior, which indicates that corporate financialization significantly weakens asymmetric cost behavior. Further studies show that the negative effect of corporate financialization on asymmetric cost behavior is mainly manifested in firms with good internal control quality, strong compensation incentive and low agency problem. On the contrary, the negative effect is insignificant in firms with poor internal control quality, weak compensation incentive and high agency problem. The results can not only enrich the existing literature, but also provide new evidence and inspiration for how to control asymmetric cost behavior of enterprises. First published online 29 October 2020

Recent research documents the phenomenon of sticky cost behavior where costs change asymmetrically between an increase and a decrease in sales and attributes this behavior to managers' deliberate decisions. In this paper, we test the relationship between sticky cost behavior and equity incentives. We find that a measure of the sensitivity of managerial wealth to stock price (delta) is positively related to sticky costs where costs increase more quickly in response to a sales increase than they decline in response to a sales decrease. Conversely, we find that a measure of the sensitivity of managerial wealth to stock volatility (vega) is positively related to anti-sticky costs where costs increase to a lesser extent in response to a sales increase than they decline in response to a sales decrease. These results indicate the importance that equity incentives have on managerial resource adjustment decisions in response to changes in firm activity levels. JEL Classifications: G32; G34. [ABSTRACT FROM AUTHOR]

Asymmetric cost behavior has been attributed to deliberate managerial resource commitment decisions and a firm's strategic choices is a significant determinant of these decisions. This study investigates the effect of strategy on the intensity and direction of the asymmetric cost behavior of selling, general, and administrative (SG&A) expenses. Employing a sample of US-listed firms for the period 1991–2014, we provide empirical evidence that a firm's strategic orientation determines the direction and intensity of cost asymmetry. Firms classified as prospectors exhibit SG&A cost stickiness whereas firms classified as defenders exhibit SG&A cost anti-stickiness. Sensitivity and causality tests indicate that a firm's strategic positioning and its portfolio of intangible re-sources independently affect the resource allocation decisions that are responsible for the direction of cost asymmetry for the SG&A expenses. [ABSTRACT FROM AUTHOR]

This study tried to examine the effect of cost asymmetry on food service companies and what characteristics affect such cost behavior. This study analyses cost behavior for cost of good sold, selling, general and administrative cost over the 2019-2020 period. Also, the rate of change in activity level was measured using change in sales. This study measures the behavior of cost using the research model of [1]. As a result of the analysis, it was found that food service companies exhibited cost asymmetric behavior as their sales level decreased. In addition, the cost asymmetric behavior has been strengthened since the corona virus, and the shorter the operating cycle. Lastly, the shorter the inventory holding period and the collection period of accounts receivable, which are components of the operating cycle, more strengthen asymmetric behavior of costs. These results seem to be meaningful in examining the cost structure and factors that may affect the structure for food service industry. This has approached the cost aspect of the situation faced by service food companies due to COVID-19, and it can be suggested that this pandemic can lead to cost reduction due to a decrease in corporate sales. [ABSTRACT FROM AUTHOR]

Asymmetric cost behavior has attracted the interest of many (empirical) researchers in the last years. Prior research determines several sources of this behavior such as resource adjustment costs, uncertainties and related beliefs, agency problems, and fixed costs. Empirical studies measure firms' cost behavior using total firm costs and sales. In imperfect markets, firms react to changing market conditions by adapting output prices and quantities so that both total firm costs and sales are affected. However, changing output prices only directly affects sales and not costs. Based on an economic model, we identify market decisions (output quantity and pricing decisions) as an additional source of measured asymmetric cost behavior. [ABSTRACT FROM AUTHOR]

This study aims to examine whether managerial optimism and profit-based incentives affect cost behavior asymmetry, especially cost stickiness. Differ from previous literature on cost stickiness, the researchers use an experimental 2 × 2 between-within subjects factorial design. This design allows us to use data related to cost management specifically, not just in general term as in studies using archival data from public financial statements. Our study results reaffirm cost stickiness literature. This study focuses on experiments among accounting students who are not knowledgeable about cost behavior asymmetry. Even though our 71 student participants know only the symmetric cost behavior theory, when presented with a scenario related to sales prospects and information on profit-based incentives, the results of this study show otherwise. When participants are more optimistic and profit-based incentives have been achieved, the level of cost stickiness is also higher. [ABSTRACT FROM AUTHOR]

Costs are sticky on average, that is, they fall less for sales decreases than they rise for equivalent sales increases. We examine the effect of this asymmetric cost behavior on a firm's dividend policy. Given investors' aversion to dividend cuts, we predict that firms with higher resource adjustment costs and stickier costs pay lower dividends than their peers because they are less able to sustain any higher level of dividend payouts in the future. We find evidence consistent with this prediction. Further, using a regression discontinuity design that exploits variation in labor adjustment costs generated by close‐call union elections, we provide evidence suggesting that the negative relation between cost stickiness and dividend payouts is driven by resource adjustment costs. Our paper sheds new light on the determinants of dividend policy and demonstrates the role of cost behavior in corporate decisions. [ABSTRACT FROM AUTHOR]

The aim of this study isto examine the effect of the company's strategy (Including competitive strategy, investment strategy, financing strategy, company strategy based on past information, and company strategy based on future information) and managerial ability on asymmetric cost behavior. For this purpose seven hypotheses are developed and data about 106 companies listed in the Tehran Stock Exchange for the period between the years 2006 to 2015 are analyzed. Regression models using panel data approach are reviewed and tested. The results show that the investment strategy, company strategy based on future information and management ability increase the asymmetry of cost behavior.In addition, the results show that the company's competitive index and financing strategy variables reduce the asymmetry of cost behavior.On the other hand, the results indicate that the company strategy based on past informationand GDP growth have no significant effect on the asymmetry of cost behavior in companies listed in the Tehran Stock Exchange.

Anderson, Banker, and Janakiraman (2003) show that costs are “sticky” (i.e., costs change relatively less when sales decrease than when sales increase) because managers are reluctant to cut resources when sales decrease. We predict that cost behavior at the middle management level is sticky also when the magnitude of sales increase is sufficiently large, considering that middle managers have more limited ability in adding resources and are more risk averse. Using a survey instrument and interviews, we find evidence that middle managers’ cost decisions are sticky at both ends. Our findings are supported by empirical evidence based on segment-level data.

The purpose of this study is to analyze the effect of Prior Sales change on R&D Costs and each detail item, and to analyze what decision managers make when changing sales. In order to conduct a more in-depth analysis as well as a one-period model of Anderson et al. (2003), which was used in previous studies, the two-period model of Banker et al.(2014) And analyzed the detailed items. As a result of the analysis, it is possible to confirm cost stickiness behavior only in the depreciation cost and others due to the limit of the model in the one period model. For a more in-depth analysis, the analysis of two-period model showed that labor costs and other items showed cost stickiness behavior when prior sales increased, but total R&D costs showed a anti-cost stickiness behavior. When prior sales decline, consigned service costs showed a cost stickiness behavior. This study is meaningful because it analyzed the effect of prior sales change on R&D cost behavior which were not performed in previous studies. Furthermore, we expect to be able to conduct more detailed research by sales and industry in future studies. [ABSTRACT FROM AUTHOR]

This study introduces a new method for predicting cost elasticity with respect to changes in sales that incorporates cost asymmetry at the firm-year level. The new method is based on widely available factors that are expected to influence cost behavior. The new method is subject to fewer data restrictions than the method proposed by Weiss (2010). By extending the cost variability and cost stickiness (CVCS) model of Banker and Chen (2006), we find that incorporating firm-year-specific proxy measures for upward cost adjustment and cost asymmetry significantly enhances earnings forecasts. However, this improvement in forecast accuracy is not reflected in contemporaneous stock returns, pointing toward a partial understanding of cost behavior by capital markets. We further find that predicted cost stickiness is associated with lower analysts' forecast accuracy and a weaker effect of earnings surprises on market reactions, confirming the results reported in Weiss (2010) for his measure of cost asymmetry. JEL Classifications: M41; G12. [ABSTRACT FROM AUTHOR]

Asymmetric cost behavior, which was first identified in Germany in the 1920s, has attracted the attention of researchers over the last two decades. Cost management is essential not only for commercial enterprises (CEs) but also for public organizations. Therefore, in this research, I focus on local public enterprises (LPEs), one type of public organization in Japan, and clarify their cost behavior. Then, taking the perspective of institutional theory, I compare LPEs with CEs. Because LPEs are required to behave according to the restrictions of LPE law, they are more vulnerable to institutional pressure. Specifically, LPEs have two normative institutional constraints: (1) efficiency and (2) the public interest (i.e., the responsibility to support people's everyday lives). Therefore, LPEs must provide certain services even if they are unprofitable. To explore whether normative institutional pressure causes LPEs to be cost inefficient, I compare the cost behavior of these enterprises with that of CEs in five ways. I analyze (1) panel data covering 40 years, (2) the change over time, (3) the differences by industry type, (4) the relationship with population changes, and (5) the effect of political influence. I find that LPEs' cost management is not necessarily cost inefficient; however, their ability to adjust costs may be lost in the future due to the influence of institutional constraints. I therefore assert that LPE administrators must constantly struggle to balance the institutional constraints of the public interest and efficiency since these factors require long-term, stable management. [ABSTRACT FROM AUTHOR]

We investigate the relationship between cost stickiness and management earnings forecasts. Prior research suggests that earnings are more volatile for sticky cost firms resulting in greater earnings forecast errors. The greater forecast errors might increase investors' demand for information and induce managers to issue earnings forecasts. Alternatively, managers might refrain from issuing earnings forecasts for sticky cost firms because greater forecast errors might damage managers' credibility and adversely affect their job security. We find that cost stickiness is positively associated with management earnings forecast issuance, suggesting that the benefits outweigh the costs. Prior research also suggests that cost stickiness has negative implications for earnings. We find a positive association between cost stickiness and management earnings forecast errors, suggesting that managers do not fully incorporate the negative implications of cost stickiness into their forecasts. Finally, we find that analysts' forecast errors for sticky cost firms are greater than managers'. JEL Classifications: M41; M46; G12. [ABSTRACT FROM AUTHOR]

The traditional view of cost behavior assumes a simple mechanistic relation between cost drivers and costs. In contrast, contemporary cost management research recognizes that costs are caused by managers' operating decisions subject to various constraints, incentives, and psychological biases. This conceptual innovation opens up the "black box" of cost behavior and gives researchers a powerful new way to use observed cost behavior as a lens to study the determinants and the consequences of managers' operating decisions. Banker and Byzalov (2014) presented an overview of the economic theory of cost behavior and major estimation issues. The research literature on cost management has grown rapidly in the past few years and has enhanced the understanding of how managerial decisions influence observed costs. In this study, we provide a comprehensive review of recent findings and insights, with a particular emphasis on the implications of cost management for understanding issues in cost, managerial, and financial accounting, and challenges and opportunities for future research. [ABSTRACT FROM AUTHOR]

While the discussion of changes in financial accounting properties over time is already well-established, there is a lack of evidence whether changing firm compositions in empirical samples might bias cost stickiness research. We document that with each additional listing cohort, the U.S. public firm universe becomes more knowledge-intensive and, at the same time, more cost sticky. Higher reliance on temporary labor by newer listing cohorts partly mitigates this development. Our results call for the use of listing cohort-specific slopes to allow for cohort-specific estimates of cost stickiness in future research. [ABSTRACT FROM AUTHOR]

Recent experimental researches conducted on cost behavior have shown that costs are increased following increase in sales but they are not decreased similarly when sales is reduced. This Asymmetric Cost Behavior is called cost stickiness. One of the most important hypotheses presented about cost stickiness is managers' informed decisions hypothesis. Therefore, this study is aimed to examine the effect of prior earning changes, as factor affecting management expectations, on cost stickiness. Sample of this research is 104 firms listed in Tehran Stock Exchange during 10-year period (2003-2012). Results of research indicate that stickiness of sale, general and administrative costs is more in two prior subsequent periods that earning has been increased. While stickiness of cost of goods sold has decreased in two prior subsequent periods that earning has been increased.

One of the most important areas in accounting management is judgment and decision making on costs prediction. This research investigates the effect of cost behavior perception and professional experience of individuals on judgment and decision making about cost prediction. In particular, we conduct a laboratory experiment with a 2×4 design mixing a within-subjects condition with a between-subjects condition. The independent variables are cost behavior (linear, sticky. anti-sticky, semi-sticky) and professional experience. The subjects of this research are classified into two groups of professional (managers) and students. Also, dependent variables of research are as follows: 1) quality or accuracy of cost prediction (mean absolute error of the individual`s predictions) and 2) Brunswick`s lens model indices (Matching, consistency and achievement).The results show that subjects are more likely to recognize symmetric (linear) cost behavior (traditional model) rather than asymmetry cost behavior (i.e. sticky and anti-sticky) and there is no difference between the professional and the students in terms of understanding these relationships. The results also show that the overreaction (or underreaction) to resource adjustment decisions when revenues are decreased is not rooted in the pre-determined mindset of individuals as a cognitive bias. [ABSTRACT FROM AUTHOR]

Extant literature on cost stickiness has focused on how firm-specific characteristics affect the asymmetric cost behavior. In this paper, we explore how a firm's operating environment affects the firm's cost stickiness. Specifically, we examine the effect of product market competition on cost stickiness since a firm's investment and cost retention decisions partly depend on how the firm interacts with its rival firms in the product markets. Using two firm-level text-based product market competition measures extracted from management disclosures in firms' 10-K filings (Li et al. in J Account Res 51(2):399-436, 2013; Hoberg and Phillips in Rev Financ Stud 23(10):3773-3811, 2010; J Polit Econ, 2015), we find strong evidence consistent with cost asymmetry increasing in competition after controlling for known economic determinants of cost stickiness. In additional analyses, we also find that the effect of product market competition on the degree of cost stickiness increases in firms' financial strength, likely because management in financially stronger firms has more resources for investment expenditures in spite of a sales fall. We also find that cost stickiness is increasing in competition if management is optimistic about future demand, whereas competition is not associated with cost asymmetry if management is pessimistic about future demand. Finally, we find that the relationship between competition and cost stickiness, although statistically insignificant at conventional levels, is more pronounced for single-segment firms relative to multi-segment firms. [ABSTRACT FROM AUTHOR]

• This study examines how litigation risk affects firms' cost behavior. • We find that litigation risk is positively associated with cost stickiness. • The association is more pronounced in labor-intensive firms and high-tech industries. • Litigation risk is a significant determinant of adjustment costs. This study examines the effect of litigation risk on firms' asymmetric cost behavior. Using data on filings of securities class action lawsuits from 1999 to 2019, we find that firms' asymmetric cost behavior increases with higher litigation risk. Furthermore, we find that the effect of litigation risk on cost stickiness is more pronounced in (1) labor-intensive firms, and (2) high-tech industries. Our study contributes to the literature by suggesting that litigation risk is a valuable determinant affecting firms' asymmetric cost behavior. [ABSTRACT FROM AUTHOR]

Cost management is one of the most significant issues in company performance and company financial management which any enterprise has to solve as in the periods of declines of sales revenues, as well as during their growth. In this study we designed and tested several regression models that could be suitable for cost behavior prediction and subsequent decision-making based on these predictions. We used multiple linear regression models with a point estimate and with interval estimate of the model parameters. Comparison of regression models of cost behavior and their reliability was carried out due to the quality of the data collected for the case of basic and adjusted data. The overheads were divided into several groups of relevant costs and their dependences were examined on different factors other than only the production volume using the correlation matrix. From the results of the transformed model we believe that asymmetric cost behavior is affected by asymmetric behavior of the chosen factors. As the final one was intended the model representing the change in costs in time shifting about one-month period. This model can be used for examining costs in time shift by a short period (e.g., months) and thus it is possible to prove cost asymmetric behavior called "sticky costs". We used the model adjusted in accordance with Anderson et al. (2003). and we kept the model clearly transformed and assembled so that there remained only those variables that had a statistically significant effect on the dependent variable. The limitations of these models were also defined. Finally, graphical analyses of deviations were performed to find similarities in cost through cost centres and through the examined periods. [ABSTRACT FROM AUTHOR]

In this paper, the validity of the cost of adhesiveness is tested for 76 companies operating in manufacturing industry. In this context, asymmetric relationship between not only sales and cost of sales but also sales and total administrative expenses is investigated with hidden panel cointegration in the paper. The asymmetric behavior differences of positive and negative shocks of cost variables investigated is proved thanks to this technique. The evidence for the presence of cost stickiness has reached in case of both increase of operational volume and decrease of operational volume in the results of the study covering the first quarter of 2007 until the second quarter of 2015. Upon analyzing the obtained results, tested cost stickiness for sales-total administrative expenses match is longer permanent tested cost stickiness for sales- cost of sales match. Moreover, it is seen that cointegration relationship is longer permanent in negative shocks than positive shocks. [ABSTRACT FROM AUTHOR]