Abstract
ABSTRACT This research investigates the effect of CEO risk-taking incentives on cost stickiness. By analyzing a comprehensive dataset comprising U.S. public firms from 1993 to 2020, we uncover that higher CEO risk-taking incentives are associated with an increased extent of cost stickiness. Moreover, we observe that this relationship is strengthened under specific conditions, namely when financial leverage is lower, corporate governance is weaker, equity market uncertainty is higher, and real investment opportunities are limited. These findings make a valuable contribution to the relevant literature, highlighting the significance of CEO risk-taking as a potential determinant of cost-related decision-making over resource allocation.
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