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Are costs really sticky and biased? Evidence from manufacturing listed companies in China

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  • Jian Xu
  • Jae Woo Sim

Abstract

Recent studies on cost behaviour have proved that cost increase caused by business expansion is larger than cost decrease caused by business downsizing. This cost stickiness behaviour contradicts the traditional theoretic assumption that cost level and business size change in a linear way. This article investigates the existence or non-existence of cost stickiness using a sample of China’s manufacturing listed companies during the period 2010–2014. First, our findings show that cost stickiness is a pervasive phenomenon and overestimated in the manufacturing industry. Second, we find that cost stickiness varies greatly across industries and in different regions. Finally, we find that cost stickiness is affected by the economic growth. Specifically, cost stickiness increases with the macroeconomic growth. Our results from China’s manufacturing listed companies provide evidence on asymmetric cost behaviour and contain important implications for both cost accounting research and financial accounting research.

Suggested Citation

  • Jian Xu & Jae Woo Sim, 2017. "Are costs really sticky and biased? Evidence from manufacturing listed companies in China," Applied Economics, Taylor & Francis Journals, vol. 49(55), pages 5601-5613, November.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:55:p:5601-5613
    DOI: 10.1080/00036846.2017.1316823
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    References listed on IDEAS

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    1. Awad Elsayed Awad Ibrahim, 2015. "Economic growth and cost stickiness: evidence from Egypt," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 13(1), pages 119-140, July.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    3. Fernando Zanella & Peter Oyelere & Shahadut Hossain, 2015. "Are costs really sticky? Evidence from publicly listed companies in the UAE," Applied Economics, Taylor & Francis Journals, vol. 47(60), pages 6519-6528, December.
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    Cited by:

    1. 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.
    2. 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.
    3. 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).
    4. Jian Xu & Yue Shang & Weizhen Yu & Feng Liu, 2019. "Intellectual Capital, Technological Innovation and Firm Performance: Evidence from China’s Manufacturing Sector," Sustainability, MDPI, vol. 11(19), pages 1-16, September.
    5. Zhenji Jin & Yue Shang & Jian Xu, 2018. "The Impact of Government Subsidies on Private R&D and Firm Performance: Does Ownership Matter in China’s Manufacturing Industry?," Sustainability, MDPI, vol. 10(7), pages 1-20, June.
    6. Naoum, Vasilios-Christos & Ntounis, Dimitrios & Papanastasopoulos, Georgios & Vlismas, Orestes, 2023. "Asymmetric cost behavior: Theory, meta-analysis, and implications," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
    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. Jian Xu & Jae-Woo Sim, 2018. "Characteristics of Corporate R&D Investment in Emerging Markets: Evidence from Manufacturing Industry in China and South Korea," Sustainability, MDPI, vol. 10(9), pages 1-18, August.
    9. Pearl Abredu & Cai Li & Frank Kofi Essien & Isaiah Agbenu Akanbi Adegoke, 2023. "Unleashing Potential: Overcoming Bottlenecks and Catalyzing Innovations in Intellectual Capital Intellectualization of Small and Medium-Sized Enterprises in Jiangsu During the Post-Industrial Era," SAGE Open, , vol. 13(4), pages 21582440231, December.
    10. Jia Li & Zhengying Luo, 2021. "Product market competition and cost stickiness: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1808-1821, October.

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