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The Effect of Strategy on the Asymmetric Cost Behavior of SG&A Expenses

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  • Apostolos Ballas
  • Vasilios-Christos Naoum
  • Orestes Vlismas

Abstract

Asymmetric cost behavior has been attributed to deliberate managerial resource commitment decisions and a firm’s strategic choices is a significant determinant of these decisions. This study investigates the effect of strategy on the intensity and direction of the asymmetric cost behavior of selling, general, and administrative (SG&A) expenses. Employing a sample of US-listed firms for the period 1991–2014, we provide empirical evidence that a firm’s strategic orientation determines the direction and intensity of cost asymmetry. Firms classified as prospectors exhibit SG&A cost stickiness whereas firms classified as defenders exhibit SG&A cost anti-stickiness. Sensitivity and causality tests indicate that a firm’s strategic positioning and its portfolio of intangible re-sources independently affect the resource allocation decisions that are responsible for the direction of cost asymmetry for the SG&A expenses.

Suggested Citation

  • Apostolos Ballas & Vasilios-Christos Naoum & Orestes Vlismas, 2022. "The Effect of Strategy on the Asymmetric Cost Behavior of SG&A Expenses," European Accounting Review, Taylor & Francis Journals, vol. 31(2), pages 409-447, March.
    • Handle: RePEc:taf:euract:v:31:y:2022:i:2:p:409-447
    DOI: 10.1080/09638180.2020.1813601
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    Cited by:

    1. Jian, Jian-hui & Hu, Dan & Tian, Haiyan & Long, Chengfeng & Yang, Fan, 2023. "Political uncertainty, officials’ characteristics heterogeneity and firm cost stickiness," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 776-791.
    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. Josep Mª. Argilés‐Bosch & Josep Garcia‐Blandón & Diego Ravenda, 2023. "Empirical analysis of the relationship between labour cost stickiness and labour reforms in Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1187-1221, April.
    4. Wanjiao Jia & Ting Yang & Xin Zhang, 2023. "The rise of robots and the fall of cost stickiness: Evidence from Chinese manufacturers," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3147-3171, September.

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