The Effect of Corporate Sustainable Management on the Relationship between Cost Stickiness and Earnings Transparency

Hyunmin Oh,Sambock Park

doi:10.3390/su132313453

Abstract

This study empirically analyzes the relationship between cost stickiness and earnings transparency. Additionally, this study examines the effect of corporate sustainable management (CSM) on the relationship between cost stickiness and earnings transparency. The evaluation scores of Korea Corporate Governance Service (KCGS) are employed to measure CSM activities. The empirical results show that the relationship between cost stickiness and earnings transparency is significant in the negative direction. This means that the more sticky the costs of a firm, the lower the earnings transparency of the firm. In addition, the relationship between the interaction variables of CSM and cost stickiness and earnings transparency is significant in the positive direction. This indicates that CSM activities act as a mechanism to mitigate the negative relationship between cost stickiness and earnings transparency. The findings of this study, which presented the effects of cost stickiness on earnings transparency and the fact that CSM activities act as a device to suppress the opportunistic cost behavior of managers, are expected to provide important implications to investors, external auditors, and supervisors.

Highlights

This study investigates the impact of cost stickiness on earnings transparency
A logic applied is that asymmetric cost behavior is the result of decision making that appears in the process through which managers pursue their own private interests and utility [2]
The regression coefficient (β1 ), which indicates the effect of cost stickiness on earnings transparency, was shown to have significant negative values according to the model

Summary

Introduction

This study investigates the impact of cost stickiness on earnings transparency. This study examines the effect of corporate sustainable management (CSM) on the relationship between cost stickiness and earnings transparency. It was assumed that volume and costs show symmetrical behaviors [1]. Studies related to asymmetric cost behavior presented various logics for the cause of cost asymmetry, and one of them is managers’ strategic decision making with regard to the uncertainty of future demand. The logic is that asymmetric cost behavior is the outcome of decision making that reflects the firm’s business environment and the structural characteristics of the industry to which the firm belongs. A logic applied is that asymmetric cost behavior is the result of decision making that appears in the process through which managers pursue their own private interests and utility [2]

Objectives

Results

Conclusion