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Stakeholder orientation and cost stickiness: Evidence from a natural experiment

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  • Li, Tongxia
  • Lu, Chun

Abstract

Using the enactment of state-level constituency statutes that allow firms to consider nonshareholding stakeholders’ interests when making business decisions as a quasi-natural experiment, we study how stakeholder orientation affects asymmetric cost behavior. We employ a difference-in-differences research design and find that the enactment of constituency statutes leads to a significant increase in the degree of operating cost stickiness. We further show that this effect is mainly driven by resource adjustment costs.

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  • Li, Tongxia & Lu, Chun, 2022. "Stakeholder orientation and cost stickiness: Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005560
    DOI: 10.1016/j.frl.2021.102618
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    Cited by:

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    6. Kim, Jonghwan (Simon) & Ra, Kyeongheum, 2022. "Employee satisfaction and asymmetric cost behavior: Evidence from Glassdoor," Economics Letters, Elsevier, vol. 219(C).

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    More about this item

    Keywords

    Stakeholder orientation; Constituency statutes; Cost stickiness; Adjustment costs;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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