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Cost management and working capital management: ebony and ivory in perfect harmony?

Author

Listed:
  • Terje Berg

    (Norwegian University of Science and Technology)

  • Emil Gustafsson

    (Norwegian University of Science and Technology)

  • Ranik Raaen Wahlstrøm

    (Norwegian University of Science and Technology)

Abstract

The aim of this paper is to empirically investigate the potential association between a firm’s cost behavior, characterized as cost stickiness or anti-stickiness, and working capital management (WCM), as measured by the working capital to total assets ratio and the trade cycle measures net trade cycle and cash conversion cycle. We measure cost stickiness using four widely accepted models and a sample of non-financial firms sourced from Compustat. Our findings highlight the significant influence of WCM on cost behavior. Specifically, we observe an inverse relationship between a firm’s WCM aggressiveness and both its cost stickiness and degree of cost adjustment. These relationships are consistent for both operating costs and the costs of goods sold.

Suggested Citation

  • Terje Berg & Emil Gustafsson & Ranik Raaen Wahlstrøm, 2024. "Cost management and working capital management: ebony and ivory in perfect harmony?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 35(2), pages 207-233, June.
    • Handle: RePEc:spr:jmgtco:v:35:y:2024:i:2:d:10.1007_s00187-024-00368-3
    DOI: 10.1007/s00187-024-00368-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Cost stickiness; Cost asymmetry; Accounting; Controlling; Cost management; Working capital management;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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