A note on cost stickiness: Some international comparisons

SSRN Electronic Journal, 2014

Brazilian Business Review, 2019

In the last decade, with the driving study by , research in managerial accounting have turned to the analysis of the phenomena that interfere in the asymmetric behavior of costs, mainly regarding the occurrence of changes in the levels of organizational activities. Weiss (2010) found that firms with asymmetric costs show a greater decline in earnings when costs increase more than sales growth, and when sales reduce and costs decrease to a lesser extent. Thus, costs are asymmetric when they increase more than the increase in sales and/or reduce to a lesser extent than the decrease in sales . According to the author, the behavior of costs is relevant for forecasting the results, and financial analysts estimate future costs based on the estimation of profits.

Cost Stickiness: Analysis and Determinants. Case Study of Saudi Companies, 2021

This paper examines the existence of cost stickiness of KSA firms using the ABJ model. By analyzing accounting data of 12 selected Saudi companies from 2010 to 2019, the results show the existence of cost stickiness in COGS more than SGA Expenses. Furthermore, a low level of debts and a high Cash-Flow ratio are associated with cost stickiness in Saudi companies.

SSRN Electronic Journal, 2012

Traditional cost accounting holds the assumption that cost changes proportionately with activity. Anderson et al.(2003) show that cost increases more when activity rises than decreases less when activity falls by an equivalent amount, a behavior that they refer to as “cost stickiness”. By following Anderson et al.(2003) researchers investigate the determinants, consequences and different aspects of cost stickiness. However, some studies raise questions about the validity of the inference made by Anderson et al.(2003). Over the last few years many authors highlight some new aspects such as earnings forecasts error, agency problem and earnings management that relate to cost stickiness. The objective of this paper is to review and synthesize the growing body of research on cost stickiness. Lack of theoretical support, merely insights provided by the literature and some inconclusive findings suggest that there are ample research opportunities to improve the understanding in this area.

World Academy of Science, Engineering and Technology, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 2014

The objectives of this study is to investigate the existence of the sticky cost behavior of firms listed in the Indonesia Stock Exchange (IDX) and to find evidence on the effects of sticky operating expenses (SG&A expenses) on profitability of firms. For the first objective, this study finds that the sticky cost behavior does exist. For the second objective, this study finds that the stickier the operating expenses the lesser future profitability of the firms. This study concludes that sticky cost affects negatively to the performance and, therefore, firms should include flexibility in designing the cost structure of their firms. Keywords—Operating Expenses, Profitability, SG&A, Sticky Costs, Indonesia Stock Exchange (IDX).

Journal of Accounting Research, 2003

A fundamental assumption in cost accounting is that the magnitude of a change in costs is the same for an equivalent magnitude of either an increase or a decrease in activity volume. In this study, we investigate whether costs are "sticky" -increase more with an activity increase than they decrease with an equivalent activity decrease. We find, for 7,629 firms over 20 years, that SG&A costs increase on average at a rate of 0.55% per 1% increase in sales but decrease only 0.35% per 1% decrease in sales. We describe a model of cost behavior in which sticky costs may occur because managers deliberately adjust the resources committed to an activity.

Journal of Management and Accounting Studies, 2020

Objective: One of the basic assumptions of management accounting indicates that changes in costs are related to increase and decrease of activity level, this inappropriate behavior of costs is known Costs Stickiness. Methodology: The aim of this study is to examine the Costs Stickiness in the Tehran Stock Exchange, also the relationship between general and administrative Costs Stickiness and corporate governance for listed companies in Tehran Stock Exchange during the years 2006-2015 will be studied and analyzed. Results: Finally, to test hypotheses and also additional tests, the regression model independent of SPSS software was used and descriptive and inferential statistics such as correlation analysis were analyzed. Conclusion: According to the results, it can be said that strong corporate governance has positive impact to reduce the Stickiness of the general administrative costs and sales.

REBRAE

This study aims to determine the presence of stick costs (sticky costs) in Brazilian and US power companies. To this end, we collected data revenues, sold merchandise cost and taxes of 33 Brazilian power companies that are listed on the BM & FBOVESPA and 25 American companies of the same sector that trade their shares on the NASDAQ and the NYSE during the years 2004 to 2013. The research findings showed that the sticky costs can be verified in the Brazilian context, since for every percentage increase of 1% of revenue the variable costs increased 1.32%, while for 1% decrease in revenues, expenses 0.78% decrease variables. Since, in the American context, there has been the presence of sticky costs, given the linearity of the increase and decrease of the variable costs due to increased or decreased revenue. These results show the differences in the management of Brazilian and North American power companies.

Proceedings of the Annual International Conference on Accounting Research (AICAR 2019), 2020

The objective of the study is to analyse the sticky cost behaviour and the factors that affect the cost stickiness on manufacturing companies listed in Indonesia Stock Exchange. The behavior of sticky cost in this study is found by analyzing selling, general and administrative costs which are categorized into several industry groups to observe the annual degree of sticky cost of each group of industry. In addition, the factors that affect the cost stickiness are capital intensity ratio, employee intensity ratio, incentive management as measured by free cash flow, and the control variable, firm size. The method used in this study is multiple linear regression analysis using the equation as measured by Anderson, Banker and Janakiraman. The sample is determined by purposive sampling method with the number of samples of 97 companies during the period 2014-2018. The results of this study are that sticky cost behavior occurs in all manufacturing companies in Indonesia. The largest and smallest degrees of sticky cost occur in animal feed and other sectors, which is as proof that the company of such sectors has inconsistent management in supervising and controlling selling, general and administrative costs. Furthermore, the results of the factors affecting the cost stickiness show that: 1) capital intensity ratio does not influence the degree of cost stickiness, 2) employee intensity ratio affects the degree of cost stickiness, 3) free cash flow does not affect the degree of cost stickiness, and 4) firm size of control variable affects the degree of cost stickiness.

INTERNATIONAL JOURNAL OF PROFESIONAL BUSINESS REVIEW, 2023

This research aims to reveal the sticky costs in Iraqi joint stock companies. Theoretical framework: Sticky costs refer to the costs that increase with the increase in revenues by a greater amount than their decrease in exchange for a similar decrease in revenues. To manage cost, it is important to understand and know the behavior of cost. Design/methodology/approach: This research uses inductive and descriptive analytical methods that is commonly used in applied and field studies on accounting and management issues, as well as in literature and empirical studies to verify research proposals. This study adopted multiple logarithmic linear regression analysis estimated by ordinary least squares (OLS) to examine asymmetrical behavior of selling costs, general and administrative costs, and costs of goods sold individually and collectively (total costs) for a sample (101) of published lists of Iraqi joint stock companies registered in Iraqi Stock Exchange for the period 2010-2019. Findings: The results showed that sticky behavior of selling and general and administrative costs and their components is a common phenomenon in cost behavior of Iraqi joint stock companies during the study period, while costs of goods sold, and total costs are not. The latter may have been showing anti-sticky behavior. Research, Practical & Social implications: Our work contrasts the conventional model of cost behaviour, in which costs move proportionately with changes in activity, with an alternative model, in which sticky costs emerge. This is because managers consciously shift the resources devoted to activities. Originality/value: The sticky cost research that has been done in relation to the initial sticky cost research, particularly in industrialised nations like the UAS, Uk, and Canada, is the main emphasis of this study. Future research will take into account how sticky research is developing in any other nations, which could expand our understanding of sticky cost research as a whole.