IDEAS home Printed from https://ideas.repec.org/a/spr/metrik/v24y2014i4p301-318.html
   My bibliography  Save this article

Cost stickiness: state of the art of research and implications

Author

Listed:
  • Thomas Guenther
  • Anja Riehl
  • Richard Rößler

Abstract

Cost functions as the foundation of managerial decision making usually assume a linear cost function with fixed and variable costs. The latter are dominantly regarded as being identical for increasing and for decreasing activity levels. However, empirical research shows that the decline in costs is smaller for decreasing than the rise in costs for increasing activity levels for the same amount of change. This effect of asymmetric cost behaviour is called ‘cost stickiness’ or ‘cost remanence’. Our paper provides an overview of the causes and occurrences of cost stickiness. Furthermore, the empirical findings on cost stickiness using regression models with archival financial accounting data are reviewed and analysed. We explore different determinants of the effect of cost stickiness. A critical look at the findings and methods of empirical studies reveals the limitation of current research and opens new streams for further research. Finally, implications of the existence of sticky costs for management accounting research and practice are drawn. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Thomas Guenther & Anja Riehl & Richard Rößler, 2014. "Cost stickiness: state of the art of research and implications," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(4), pages 301-318, February.
    • Handle: RePEc:spr:metrik:v:24:y:2014:i:4:p:301-318
    DOI: 10.1007/s00187-013-0176-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00187-013-0176-0
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00187-013-0176-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Itay Kama & Dan Weiss, 2013. "Do Earnings Targets and Managerial Incentives Affect Sticky Costs?," Journal of Accounting Research, Wiley Blackwell, vol. 51(1), pages 201-224, March.
    2. Mark C. Anderson & Rajiv D. Banker & Surya N. Janakiraman, 2003. "Are Selling, General, and Administrative Costs “Sticky”?," Journal of Accounting Research, Wiley Blackwell, vol. 41(1), pages 47-63, March.
    3. Clara Xiaoling Chen & Hai Lu & Theodore Sougiannis, 2012. "The Agency Problem, Corporate Governance, and the Asymmetrical Behavior of Selling, General, and Administrative Costs," Contemporary Accounting Research, John Wiley & Sons, vol. 29(1), pages 252-282, March.
    4. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
    5. Banker, Rajiv D. & Byzalov, Dmitri & Chen, Lei (Tony), 2013. "Employment protection legislation, adjustment costs and cross-country differences in cost behavior," Journal of Accounting and Economics, Elsevier, vol. 55(1), pages 111-127.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mabel D. Costa & Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2021. "Financial constraints and asymmetric cost behavior," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(1), pages 33-83, March.
    2. 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.
    3. Komang Ayu Krisnadewi & Noorlailie Soewarno, 2021. "Optimism and profit-based incentives in cost stickiness: an experimental study," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(1), pages 7-31, March.
    4. Thomas R. Loy & Sven Hartlieb, 2018. "Have estimates of cost stickiness changed across listing cohorts?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(2), pages 161-181, August.
    5. Cristiana Cattaneo & Gaia Bassani, 2020. "Sticky costs: le determinanti e le sfide per manager e accademici," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2020(Suppl. 1), pages 103-126.
    6. Sven Hartlieb & Thomas R. Loy, 2022. "The impact of cost stickiness on financial reporting: evidence from income smoothing," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3913-3950, September.
    7. Mohammad Mahdi Rounaghi & Hajer Jarrar & Leo-Paul Dana, 2021. "Implementation of strategic cost management in manufacturing companies: overcoming costs stickiness and increasing corporate sustainability," Future Business Journal, Springer, vol. 7(1), pages 1-8, December.
    8. Ibrahim, Awad Elsayed Awad & Ali, Hesham & Aboelkheir, Heba, 2022. "Cost stickiness: A systematic literature review of 27 years of research and a future research agenda," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    9. Hakim Lyngstadaas, 2020. "Packages or systems? Working capital management and financial performance among listed U.S. manufacturing firms," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(4), pages 403-450, December.
    10. Shohei Nagasawa, 2018. "Asymmetric cost behavior in local public enterprises: exploring the public interest and striving for efficiency," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(3), pages 225-273, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gu, Yuqi & Ouyang, Bo, 2024. "Debt covenant violations and corporate cost management," Advances in accounting, Elsevier, vol. 65(C).
    2. Wulung Li & Ramachandran Natarajan & Yan Zhao & Kenneth Zheng, 2021. "The effect of management control mechanisms through risk-taking incentives on asymmetric cost behavior," Review of Quantitative Finance and Accounting, Springer, vol. 56(1), pages 219-243, January.
    3. Kerstin Lopatta & Thomas Kaspereit & Laura‐Maria Gastone, 2020. "Managerial style in cost asymmetry and shareholder value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 800-826, July.
    4. Thomas R. Loy & Sven Hartlieb, 2018. "Have estimates of cost stickiness changed across listing cohorts?," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(2), pages 161-181, August.
    5. Jeon, Heung-Jae, 2024. "CEO narcissism and asymmetric cost behavior," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    6. Li, Tongxia & Lu, Chun, 2022. "Stakeholder orientation and cost stickiness: Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 47(PA).
    7. Cristiana Cattaneo & Gaia Bassani, 2020. "Sticky costs: le determinanti e le sfide per manager e accademici," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2020(Suppl. 1), pages 103-126.
    8. Li, Tongxia & Lu, Chun & Chen, Zhihua, 2023. "The unintended consequence of collateral-based financing: Evidence from corporate cost behavior," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).
    9. Wei Huang & Jaehyeon Kim, 2020. "Linguistically Induced Time Perception and Asymmetric Cost Behavior," Management International Review, Springer, vol. 60(5), pages 755-785, October.
    10. Peng Liang & Hasan Cavusoglu & Nan Hu, 2023. "Customers’ managerial expectations and suppliers’ asymmetric cost management," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1975-1993, June.
    11. Dae-Hyun Kwon, 2019. "Demand Uncertainty, Cost Behavior, and the Asian Financial Crisis: Evidence from Korea," Sustainability, MDPI, vol. 11(8), pages 1-12, April.
    12. Ibrahim, Awad Elsayed Awad & Ali, Hesham & Aboelkheir, Heba, 2022. "Cost stickiness: A systematic literature review of 27 years of research and a future research agenda," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    13. Xin, Xianyang & Wong, Jin Boon & Hasan, Mostafa Monzur, 2021. "Stakeholder orientation and cost stickiness," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    14. Kitching, Karen & Mashruwala, Raj & Pevzner, Mikhail, 2016. "Culture and Cost Stickiness: A Cross-country Study," The International Journal of Accounting, Elsevier, vol. 51(3), pages 402-417.
    15. Rajiv Banker & Russell Barber & Dana Hollie & Han-Up Park, 2024. "Order backlog and its association with fundamental analysis metrics and future earnings," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1733-1753, May.
    16. Mabel D. Costa & Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2021. "Financial constraints and asymmetric cost behavior," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 32(1), pages 33-83, March.
    17. Zhaoyang Gu & Song Tang & Donghui Wu, 2020. "The Political Economy of Labor Employment Decisions: Evidence from China," Management Science, INFORMS, vol. 66(10), pages 4703-4725, October.
    18. James N Cannon & Bingbing Hu & Jay Junghun Lee & Daoguang Yang, 2020. "The effect of international takeover laws on corporate resource adjustments: Market discipline and/or managerial myopia?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1443-1477, December.
    19. Michael E Bradbury & Tom Scott, 2018. "Do managers forecast asymmetric cost behaviour?," Australian Journal of Management, Australian School of Business, vol. 43(4), pages 538-554, November.
    20. Lijun Ma & Xin Wang & Che Zhang, 2021. "Does Religion Shape Corporate Cost Behavior?," Journal of Business Ethics, Springer, vol. 170(4), pages 835-855, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:metrik:v:24:y:2014:i:4:p:301-318. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.