How does CEO famine experience affect corporate labour cost stickiness?

Contemporary points of view have posited that cost behavior is asymmetrical and tends to be sticky. The purpose of this study is to determine the development of cost behavior research, especially about cost stickiness, in reputable international journals. There are 142 articles that meet the criteria which have been obtained from the Scopus database. Bibliometric analysis has been performed with the help of the VOSviewer application. The results of the analysis show that research related to cost stickiness has increased in the last decade. The cost stickiness research consists of the following clusters: 1) the health industry; 2) labor costs; 3) social, environmental and sustainability issues; 4) corporate governance; 5) specific problems in manufacturing; and 6) leadership characteristics. The topics of research on cost stickiness that are still being researched are related to the role of the environmental community, business strategy, and the role of managerial leadership. In this analysis, the authors also show that articles that treat cost stickiness as an independent variable are limited. Based on the results of this analysis, we provide suggestions regarding opportunities for research on cost stickiness in the future.

Prior literature suggests that cost stickiness increases the ex-ante volatility and reduces the predictability of earnings. We examine whether managers intentionally undo such consequences by dampening earnings volatility. Exploiting the staggered adoption of wrongful discharge laws as an exogenous instrument for cost stickiness, we document that cost stickiness increases managers’ income-smoothing activities. This response is more pronounced in firms whose earnings are more sensitive to labour costs than their industry peers are and in firms with stronger information-provision incentives. Additional analyses indicate that income smoothing improves sticky-cost firms’ earnings informativeness and that the identified impact of cost stickiness is primarily driven by labour costs. Our results suggest that labour regulations can influence managers’ financial reporting incentives via cost behaviour.

This paper investigates the cost behavior in the Korean defense industry. Managers in the defense industry tend to have motivation to manage earnings because the costs incurring in the production process of defense articles are reimbursed based on cost plus contracts. Results are as follows. First, in the sample of the defense sector, SG&A costs and total manufacturing costs exhibited anti-stickiness whereas labor costs exhibited cost stickiness. Other cost components displayed symmetric cost behavior. Next, in the commercial sector, material costs, direct material costs, total * This paper is partially drawn from Hong-Jung Yong’s dissertation at Seoul National University ** Defense Acquisition Program Administration, e-mail: afdragon@hanmail.net *** Business School, Seoul National University, e-mail: ahnts@snu.ac.kr **** Correspondent Author. School of Management, Kyung Hee University, e-mail: jhrjhr@khu.ac.kr ***** Department of Accounting, Soongsil University, e-mail: parkjh04@ssu.ac.kr 32 Seoul Journal of Business manufacturing costs, cost of goods sold, and total costs exhibited antistickiness. Labor costs showed cost stickiness whereas SG&A costs, overhead costs, and indirect production costs had symmetric cost behavior. Overall, the results reveals that the change rate of labor costs of the defense sector exhibits more cost stickiness to changes in sales than the commercial sector.

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.

Purpose The purpose of this paper is to investigate the relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange. Design/methodology/approach Data of all Iranian manufacturing listed companies gathered for testing hypotheses during 2010–2016 and R statistical software are employed in order to analyzing data. Findings The results of this study indicate that there is a significant relationship between administrative, sale, material, labor and overhead costs and the financial reporting qualities of the companies under study. Originality/value The study focuses on relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange, which is the first study of its type in Iran.

This research aims to determine the sticky costs behavior that occurs in manufacturing companies listed on the Indonesia Stock Exchange. The behavior of sticky costs in this research is seen from sales, general and administration costs which are categorized into several industry groups to see the degree of sticky costs for each industry group per year. Apart from that, the factors that influence sticky costs include direct labor costs and overhead costs. goods sold. The research method used is multiple linear regression analysis which is measured using the Anderson, Banker and Janakiraman equations. The sample was determined based on the purposive sampling method with a total of 65 research samples obtained during the 2017-2019 period. The results of this research are that all manufacturing companies in Indonesia have sticky costs behavior. The largest and smallest degrees of sticky costs occur in the textile, garment and footwear sectors and others. This proves that management in companies in these sectors is inconsistent in monitoring and controlling sales, general and administrative costs. Then regarding the influence of direct labor costs and the cost of goods sold is as follows: 1) Direct labor costs have no effect on sticky costs, 2) Cost of goods sold has no effect on sticky costs.

On the basis of labor economics theories, we posit that adjustment in human capital accounts for a significant part of cost stickiness. Using the education level of employees as a measure of the quality of human capital, we find that labor cost changes driven by the adjustment of employee education level are sticky. This stickiness cannot be explained by the standard adjustment cost theory and is more salient during industry expansion. We further show that firms that actively adjust their employee quality during downturns experience improved future performance. Our findings are robust to alternative measures and specifications. Overall, this study extends the economic theory of sticky costs by showing that human capital adjustment drives cost stickiness. Moreover, such adjustments have long-term implications on the firm’s performance.

Given the background of enterprises facing with rising labor costs and shortage of human resources, we use a large sample of firms in China during 2004-2011 to test the sticky characteristic of labor cost. We also test the effect of labor protection on cost stickiness based on the implementation of Labor Contract Law. We find that the labor cost of listing firms in China is sticky, and the stickiness of state-owned enterprises is higher than that of non-state-owned enterprises. Furthermore, implementation of Labor Contract Law increased labor cost stickiness, both state-owned enterprises and non-state-owned enterprises.

PurposeOn the basis of labor economics theories, this study examines how adjustment in human capital accounts for labor cost stickiness.Design/methodology/approachThis study makes use of employee education level as a measure of the quality of human capital and relies on data from Chinese public firms to conduct the empirical test. This study focuses on two important components of labor cost changes: one corresponding to the adjustment in the number of employees (capacity adjustment) and another corresponding to the adjustment in the mix of employee education levels (quality adjustment).FindingsThis study reveals that labor cost changes driven by the adjustment of employee education level are sticky. This stickiness cannot be explained by the standard adjustment cost theory. This further shows that firms that actively adjust their employee quality during downturns experience improved future performance. The findings are robust to alternative measures and specifications.Originality/valueThis study provides new evidence for and insights into the cost behavior literature. Previous studies treat input resources in a homogenous way and focus on the effect of capacity adjustment. This study considers the heterogeneity of resources and examines three dimensions of salary cost adjustment: capacity, structure, and unit cost. In line with the economic theory of sticky costs proposed by Banker et al. (2013a), the study’s evidence sheds light on the additional underlying economic mechanisms driving cost stickiness behavior. Specifically, managers asymmetrically adjust both employee structure and average salaries, in addition to employee number. This study also adds to the existing knowledge of the consequences of managers' actions regarding cost behavior.

Purpose: While research on cost stickiness has predominantly focused on large public companies, the variability in results has cast doubt on the generalizability of sticky cost behavior to all companies. This paper investigates whether cost sticki-ness is observable in smaller private companies – i.e., firms without publicly traded securities – thus addressing a notable gap in the literature. Design/methodology/approach: This study adopts the empirical framework of Anderson et al. (2003), using data from private Italian firms from 1998 to 2022. Furthermore, it extends the scope of analysis to include such diverse cost catego-ries as selling, general, and administrative (SG&A) costs, total labor cost, purchase costs, rent costs, and other operating expenses. Findings: The findings indicate that SG&A costs in private firms are significantly less sticky than those reported for large public firms. Cost stickiness is also ob-served in labor, rent, and other operating costs but not in purchase costs. Notably, cost stickiness varies across industries. Originality/value: This study sheds new light into the dynamics of cost stickiness by highlighting how asymmetrical cost behavior in small and medium-sized pri-vate companies differs from that in large public companies, enhancing the under-standing of cost management practices across business contexts.

This experimental study investigates whether prior period sales declines, the psychological costs of layoffs, and manager psychological agency (self-focus) influences managers’ decisions to cut labor costs in a “sticky cost” context. Using 149 experienced managers recruited through CloudResearch as participants, we manipulate prior period sales changes (increase versus decrease) and perceived psychological costs of employee layoffs (higher in a “family” culture; lower in a “distant” culture) to investigate managers’ labor downsizing choices in the face of pressure to maintain income due to a current period sales decline. We also measure manager agency to examine its influence on labor cost reduction decisions. Findings suggest that managers are more likely to lay off employees when facing successive sales decreases, and less likely to do so when psychological costs are high and prior year sales increased. In addition, we find that managers higher in agency are more likely to cut employees in order to achieve a short-term bonus. However, when given the choice to reduce labor costs using pay cuts or layoffs, more-agentic managers favor pay cuts over layoffs, thus retaining labor resources (consistent with empire building). We discuss the implications of our results for practice and future research into asymmetric cost behavior.

This research aims to find the indication of sticky cost behavior in agricultural companies listed on Indonesian Stock Exchange in 2012-2015. Sticky cost is a cost that has no comparable character with changes in activity. These costs become sticky when the declining of company’s activity happens. This study used 9 companies as samples. The sampling technique used is purposive sampling. The analysis method used is multiple linear regression. It is found that the labor cost increased by 0,913 percent and operating expenses increrased by 0,146 percent when sales increased by 1 percent. In the other hand, when sales decreased by 1 percent, the labor cost decreased by 0,225 percent and operating expenses decreased by 0,131 percent. The result shows that there is indication of sticky cost behavior in the labor cost and operating expenses.

Carbon emission trading scheme and corporate labor cost: Evidence from China

In China’s transitional economy, one of the major objectives of the government is to maintain social stability. We hypothesize that, through state ownership and appointment of executives, Chinese government officials can influence firms’ employment decisions and reduce labor cut when firms’ sales decline, thus affecting the labor cost stickiness. Consistent with this hypothesis, we find that state owned enterprises (SOEs) have a higher degree of labor cost stickiness than non-SOEs, and SOEs with politically connected managers have stickier labor costs than those without. Such effects are stronger in regions with weak market institutions and during time periods when government officials are to be promoted. We also show that the government reciprocates SOEs’ sticky labor policies with subsequent subsidies. In contrast, political forces have little impact on the stickiness of other costs, indicating that the impact of the government is the strongest on labor employment. Collectively, our results support the argument that political incentives shape firms’ labor employment decisions and thus labor cost behavior.

The impact of state-owned capital on labor cost stickiness in private firms: Evidence from China