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Cost stickiness and stock price crash risk

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  • Ahsan Habib
  • Mabel D Costa

Abstract

We examine the association between cost stickiness and the risk of stock price crash, defined as asymmetry in the distribution of weekly stock returns. We use information opaqueness and heterogeneous investor beliefs as our two theoretical frameworks. Using a sample of US firms, we find a positive association between cost stickiness and crash risk. This association is more pronounced for firms with an opaque information environment as proxied by fewer analysts following. As efficient cost management is key to profit maximisation, studying the implications of cost stickiness makes a valuable contribution to the literature on cost management.

Suggested Citation

  • Ahsan Habib & Mabel D Costa, 2022. "Cost stickiness and stock price crash risk," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4247-4278, December.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:4:p:4247-4278
    DOI: 10.1111/acfi.12935
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    Cited by:

    1. Mabel D Costa & Ahsan Habib, 2023. "Cost stickiness and firm value," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 34(2), pages 235-273, June.

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