CEO Locality and Employment Stickiness

Visiting monks: Are nonlocal CEOs paid more?☆

Purpose Political uncertainty arguably affects managers’ resource adjustment decisions, like preserving or releasing unutilized resources when sales decline. Such resource adjustment decisions will affect cost stickiness. Accordingly, this study aims to analyze the effects of political connections and election years on cost stickiness. Political connections are predicted to increase cost stickiness because of firms’ greater reliance on the government and the presence of politicians who utilize firms’ resources to meet their political interests. Further, the authors predict that election years decrease cost stickiness because managers are less optimistic about future sales due to greater political uncertainty. Design/methodology/approach This study uses Indonesian listed nonfinancial firms in 2014–2023 as the research data, generating 4,086 firm-year observations as the final sample. It uses regression analysis to test the data. Findings This study finds that firms exhibit cost anti-stickiness behavior, reducing committed resources in response to declining sales. The results also indicate that politically connected firms exhibit lower cost anti-stickiness (greater cost stickiness) than nonpolitically connected ones. Firms’ political connections enable politicians to require firms to incur greater labor costs by increasing or retaining employees for political support. Further, firms exhibit higher cost anti-stickiness (lower cost stickiness) during election years than nonelection years because firms face greater political uncertainty that erodes managerial optimism. Consequently, firms release resources and hold only barely sufficient resources. Originality/value This study documented that sociopolitical factors (political connections and election years) affect managers’ resource-related decisions. Particularly in Indonesia, when the political conditions changed during the reform era, numerous business owners joined the parliament. This led to many firms relying on political connections to run the business.

Using a large sample of U.S. firms, we provide evidence of the effect of CFO overconfidence on firms' resource adjustment decisions. After controlling for CEO overconfidence, we find CFO overconfidence is positively associated with cost stickiness. We also find that CFO power relative to the CEO increases the positive association between CFO overconfidence and cost stickiness. Our study contributes to our understanding of the important role of CFOs in operational decisions such as resource adjustment decisions. We also extend the literature on cost behavior by highlighting managerial characteristics as an important determinant of resource adjustment decisions. Our study has important practical implications. Unlike resource adjustment decisions driven by agency problems or other incentive-related issues, such decisions driven by managerial overconfidence cannot be addressed with incentive contract designs. Promising ways to mitigate overconfidence-driven resource adjustment decisions include making overconfident managers aware of their potential behavioral biases and challenging their expectations.

Using a large sample of U.S. firms, we provide evidence of the effect of CFO overconfidence on firms’ resource adjustment decisions. After controlling for CEO overconfidence, we find that CFO overconfidence is positively associated with cost stickiness. In addition, we find that CFO power relative to the CEO increases the positive association between CFO overconfidence and cost stickiness. Our study contributes to our understanding of the important role of CFOs in operational decisions such as resource adjustment decisions. We also extend the literature on cost behavior by highlighting managerial characteristics as an important determinant of resource adjustment decisions. Our study has important practical implications. Unlike resource adjustment decisions driven by agency problems or other incentive-related issues, such decisions driven by managerial overconfidence cannot be addressed with incentive contract designs. More promising ways to mitigate overconfidence-driven resource adjustment decisions include making overconfident managers aware of their potential behavioral biases and challenging their expectations.

Managerial discretion and agency cost in Indian market

Rollover risk is the risk that a firm may not be able to refinance its debt when it becomes due. We investigate whether managers’ resource adjustment decisions are influenced by rollover risk and find that cost stickiness is decreasing in rollover risk. Additionally, the negative relationship between rollover risk and cost stickiness is stronger for firms with higher financial constraints and fewer financing sources. These results suggest that, when faced with elevated rollover risk, managers are willing to forego the benefits from a sticky cost behaviour. Finally, the use of an alternative firm‐specific measure of cost stickiness corroborates our main finding.

This study presents evidence on the relationship between consumer sentiment and resource adjustment decisions. Consumer sentiment is an important piece of economic information, accepted as a reliable predictor of future economic activity, which is why it should influence managerial expectations underlying future-oriented resource adjustment decisions. In line with these considerations, I find that managers are more likely to retain slack resources following a decrease in sales when consumer sentiment about future business prospects is improving. Managers seem to adopt consumers’ optimism about future economic prospects by deciding to stall resource adjustments until sales recover to avoid current and future adjustment costs, thus increasing firms’ level of sticky cost behavior. Together with various additional analyses, this study provides new insights into managers’ resource adjustment decision-making process and enhances our understanding of the information upon which managers form their expectations.

This study presents evidence on the relationship between consumer sentiment and resource adjustment decisions. Consumer sentiment surveys are wide-spread pieces of economic information, accepted as reliable predictors of future economic activity, which is why they should influence managerial expectations underlying future-oriented resource adjustment decisions. In line with these considerations, I find that managers are more likely to retain slack resources following a decrease in sales when consumer sentiment about future business prospects is improving. Managers seem to adopt consumers’ optimism about future economic prospects by deciding to stall resource adjustments until sales recover to avoid current and future adjustment costs, thus increasing the firms’ level of sticky cost behavior. Together with various additional analyses, this study provides new insights into managers’ resource adjustment decision-making process and enhances our understanding of the information upon which managers form their expectations.

Cost asymmetry indicates that costs decrease to a lesser extent when sales decline than costs increase when sales rise by the same magnitude. This asymmetric sensitivity of costs to activity changes is denoted as “cost stickiness” (Anderson et al. in J Account Res 41:47–63, 2003). Prior studies on cost analysis identify resource adjustment costs and managerial discretion as fundamental drivers of asymmetric cost behavior. This study examines whether linguistically induced time perception arising from future time reference in languages relates to the asymmetric sensitivity of costs to activity changes. We find that asymmetric cost behavior is more pronounced for firms located in countries whose languages do not require future events to be grammatically marked. Our evidence suggests that time encoding in languages influences speakers’ cognition, their resource adjustment decisions, and the cost behavior of firms they manage.

We examine whether dispersion in cost stickiness is fully incorporated in estimates of gross domestic product (GDP). The sectoral shift hypothesis argues that when layoffs occur in certain sectors, it can take time for employees to find new jobs (presumably in a different sector), leading to labor reallocation frictions that lower GDP in the interim. Cost stickiness captures managerial resource decisions relative to the direction of sales changes, and therefore, when aggregate dispersion in cost stickiness is higher, firms/sectors are making different resource adjustment decisions, and extrapolating the sectoral shift hypothesis, we predict that these resource reallocation frictions lead to lower GDP. We find that dispersion in cost stickiness is associated with lower actual GDP and downward restatements of GDP, suggesting that the original GDP estimates do not fully incorporate this information. Since GDP estimates have widespread influence on decision‐making by government, businesses, and investors, information that can improve the accuracy is important.

More resources are better? Strategic alliance involvement and cost stickiness

Career adaptability is a critical psychological resource for adolescents during their transition from secondary to postsecondary education. Based on prospective data from 451 Chinese adolescents (M = 16.87, SD = 0.63; 46.3% female), this study examined the mediating role of adolescents' consideration of future consequences (CFCS) in the association between career-related parental behaviors and adolescents' career adaptability. Results demonstrated that career-related parental support at Wave 1 was associated positively with adolescents' career adaptability and its subdimensions (i.e., career concern, control, curiosity, and confidence) at Wave 3 (i.e., 10 months later). Adolescents' CFCS at Wave 2 (i.e., 5 months later after Wave 1) served as a mediator linking career-related parental support at Wave 1 and career concern, control, and curiosity, but not confidence at Wave 3. Neither parental lack of engagement nor interference at Wave 1 predicted adolescents' career adaptability at Wave 3. These results suggest that interventions assisting parents in performing supportive behaviors, such as engaging in adolescents' career exploration activities and offering information about various kinds of jobs, might be useful strategies to foster adolescents' curiosity and confidence in choosing future career paths. Additionally, counselors and parents may offer adolescents strategies to strengthen their abilities to consider the potential influences of their current behaviors on future career paths (e.g., prioritizing behaviors and activities related to their future career paths over activities that only provide immediate or short-term gratification) to promote their capabilities of coping with challenges during the career transition period. (PsycINFO Database Record (c) 2020 APA, all rights reserved).

Objective: The purpose of this research is investigating the effect of community social capital on asymmetric behavior of cost. Social capital refers to features of social organization such as norms and networks that simplify cooperation and harmony for mutual benefit. Community social capital captures the strength of cooperative norms and the density of social networks in a region. Cost stickiness is a behavioral property of cost that is substantially based on managerial decisions. In this case of cost behavior, managers are quick to expand resources when demand is increasing, but for a variety of reasons choose to stick with unutilized capacity when sales are decreasing. As such, community social capital is a socio-economic factor that might affect managerial resource adjustment decisions via different channels. Methods: The method of the present research is descriptive-correlation because in this study the principle is to make hypotheses, test them, explain the relationships between phenomena and also analyze the dependent variable based on independent variables.For this purpose, we have collected the financial information related to 191 companies listed in Tehran Stock Exchange during the period of 2012 to 2018 and measure the community social capital index by different provinces of the country. In order to measure the community social capital index, we used the components of participation rate in elections, labor force participation rate, density of social networks and density of non-profit organizations by quarterly method. We also use multiple linear regression patterns to test research hypotheses. Results: Research findings indicate that, there is a significant relationship between community social capital and the degree of stickiness in selling, general and administrative costs. In this regard community social capital significantly increases the degree of stickiness in selling, general and administrative costs. The findings also show that, there is no significant relationship between community social capital and the degree of stickiness in the total operating costs and cost of goods sold. Hence, we observe an issue related to the personal motivations of managers and their opportunistic behaviors. Conclusion: Based on the findings of the study, it can be argued thatcommunity social capital restrains managers from taking opportunistic resource adjustment decisions that would reduce costs stickiness. And this leads to an increase in the degree of costs stickiness. This article confirms the important role of managerial opinion in cost behavior and how local environmental factors show differences in firm’s cost behavior.

Cost stickiness refers to an increase in costs when activities increase more than a decrease in costs in response to a decline in activities of the same magnitude. In this respect, managers play a crucial role in resource adjustment decisions, and various factors affect these decisions, including managerial optimism. In turn, managerial optimism is affected by economic conditions and economic crises, including the latest one affected by the Covid-19 pandemic. This will greatly reduce managerial optimism and motivate them to reduce greater resources when sales decline, even greater than the sales decline. Accordingly, this study tests the relationships between The Covid-19 pandemic, cost stickiness, and profitability of Indonesian listed firms in 2018-2020. We find that (1) firms reduce SG&A costs more to respond to sales decline during The Covid-19 pandemic, and (2) firms experiencing sales decline during The Covid-19 pandemic even exhibit better financial performance. Thus, this study indicates that higher profits are not always affected by increased income but also probably by cost decline that is greater than sales decline.

Understanding the current challenges addressed in the goals of the 2030 United Nations Agenda can influence career choices, encouraging individuals to pursue careers that contribute positively to addressing them. This study examines the association between the propensity to consider the Sustainable Development Goals (SDGs) in relation to future educational and career paths, courage, proactive career behaviors and life satisfaction, and the mediating role of courage and proactive career behaviors on the association between the propensity to consider the SDGs in relation to future educational and career paths and life satisfaction. The study sample consisted of 314 Italian university students. The serial multiple mediation model was used to examine the direct, indirect, and total effects. The results showed that the propensity to consider SDGs in relation to future educational and career paths, through courage and proactive career behaviors, has a positive impact on life satisfaction. The findings of this study have led to several actionable policy recommendations. These advocate for the integration of activities related to modules on the SDGs into their curricula. In addition, practical implications for career guidance interventions are proposed to consider the role of the SDGs in future career planning.