Asymmetric Cost Behavior Research Articles

Cost stickiness in the Italian Mutual Banks and comparison among Less Significant Banks

This study investigates cost stickiness in the Italian banking system, with a specific focus on Less Significant (LS) banks, including Mutual Banks (MBs), during the period 2006-2019. The research seeks to identify whether LS banks exhibit asymmetric cost behavior, particularly in response to income and credit risk level variations. Utilizing a unique dataset of 5,446 observations and applying econometric models adapted from the seminal work of Anderson et al. (2003), this study provides a novel analysis of cost stickiness within a banking context, an area that has been underexplored in the existing literature. The results reveal significant cost stickiness across all LS banks, with MBs demonstrating more pronounced stickiness than other LS banks. Additionally, the findings show that higher levels of credit risk exacerbate cost stickiness, while greater efficiency mitigates this effect. These insights underscore the importance of tailored cost management strategies in the banking sector, particularly for MBs, and contribute to understanding the unique challenges LS banks face in Italy. The research’s originality lies in its focused examination of cost behavior within a distinct subset of the Italian banking system, providing new perspectives on how smaller, regionally-focused banks manage financial pressures.

Do Female CEOs Manage Costs Differently? Evidence From Asymmetric Cost Behavior

Do Female CEOs Manage Costs Differently? Evidence From Asymmetric Cost Behavior

The impact of fiscal expenditure fluctuation on cost asymmetry: Evidence from China

AbstractThis study investigates the relationship between district government fiscal expenditure fluctuation and asymmetric cost behaviour in China. Using the unique manual data sets of Chinese A‐listed firms during the period 2003–2018, we find that cost stickiness is a pervasive phenomenon and that fiscal expenditure fluctuation positively affects cost stickiness. The results also demonstrate this effect is more pronounced when labour input is high and the size of the population is large. In addition, our further analysis indicates that higher social welfare incomes and the higher administrative level of a city can influence these results.

Do options trading activities affect underlying firms' asymmetric cost behavior?

We investigate whether options trading activities affect underlying firms' degree of cost stickiness. Using a panel of US companies, we find that options trading activities reduce the underlying firms' level of cost stickiness. Our findings are robust to alternative proxies for options trading activities and cost stickiness, two-stage least-squares regression, and two quasi-natural experiments. Additional analyses indicate that the negative effect of options trading activities on cost stickiness is more pronounced for firms with higher availability of cash flows and lower corporate governance and audit quality. Finally, we implement a mediator analysis and show that higher options trading activities improve underlying firms' investment efficiency as they have more efficient corporate resource allocation via lower levels of cost stickiness. Overall, our results underscore the monitoring and governance role of options trading activities in enhancing underlying firms' information environment and limiting their insiders' opportunistic behaviors, resulting in fewer corporate resource misallocation activities via reduced degrees of cost stickiness.

Strategic positioning and asymmetric cost behavior

PurposeThis paper explores if the firm’s strategic orientation can be associated with differences in cost behavior activity.Design/methodology/approachUsing Compustat data from 1979 to 2012, the archival study examines if there are differences between differentiation and cost leadership strategies on the firm’s cost stickiness.FindingsThe main finding provides evidence that firms pursuing a differentiation strategy exhibit greater cost stickiness, on average, as compared to firms pursuing a cost leadership strategy. This relationship is moderated by the optimistic or pessimistic expectations of managers for future sales.Originality/valueThis paper contributes to the literature on cost management by explaining how strategic positioning affects firms’ cost behavior using the framework of asymmetric cost behavior. The study encompasses both product and period costs and documents the impact on earnings.

Geographic industry concentration and asymmetric cost behavior

AbstractThis research diverges from the existing literature on cost stickiness by examining the relationship between a firm's geographic proximity to industry peers, termed industry co‐location, and its asymmetrical cost behavior. We propose that managerial decisions regarding resource adjustment are influenced by the state of resource markets in the firm's vicinity, hypothesizing that a high concentration of industry peers triggers downward asset price spirals during simultaneous resource liquidation. Additionally, we anticipate that industry‐wide demand exceeding fixed capacity exacerbates congestion costs, thereby diminishing bargaining power in local resource markets. We predict that heightened resource adjustment costs linked to industry co‐location discourage managers from reducing capacity commitments, thereby increasing cost stickiness. Our findings support this prediction, demonstrating a positive association between industry co‐location and cost stickiness. Moreover, we observe that cost stickiness intensifies when closely located industry peers experience declines in sales. This paper provides initial evidence illuminating the impact of industry co‐location on cost stickiness and suggests managerial implications to prevent costlier capacity adjustment through local resource markets.

The effect of debt intensity on the asymmetric cost behavior: empirical evidence from local governments

PurposeThis study explores the relationship between debt intensity and cost stickiness at the local government level, a setting characterized by the existence of debt constraints and political influence.Design/methodology/approachBuilding on a theoretical framework informed by the concepts of coercive isomorphism and accountability, the present study focuses on Greek municipalities and applies Anderson et al.’s (2003) extended methodology, as reviewed by Banker and Byzalov (2014), in a sample of 1,366 municipality year observations for the period 2011–2020.FindingsThe results indicate that the degree of cost asymmetry is negatively associated with debt intensity. Periods before elections present the same picture. This negative relationship becomes insignificant in the case of large municipalities, which probably require more resources to support their operations and incur higher adjustment costs for reducing resources. These findings are robust to use alternative types of expenses associated with cost stickiness and a battery of control variables.Originality/valueLittle is known about the impact of debt level and financial constraints on cost behavior in the public sector context. This study takes a fresh look at the relationship between municipal debt structure and cost stickiness, adding to the understanding of cost behavior considering the debt level, financial constraints, resource-adjustment costs and the underlying managerial behavior.

Does asymmetric cost behaviour impact conditional conservatism practices? A quantile regression approach

Does asymmetric cost behaviour impact conditional conservatism practices? A quantile regression approach

Creditors’ Role in Shaping Asymmetric Cost Behavior: Evidence from Debt Covenant Violation

ABSTRACT This study uses covenant violations as a quasi-natural experimental setting to examine creditors’ roles in shaping corporate cost behavior. Using a regression discontinuity design, I find that cost stickiness experiences a sharp decline following debt covenant violations when control rights are transferred to creditors. The cost stickiness effect is more substantial for borrowers with lower credit ratings and when creditors possess greater bargaining power. The effect is also more pronounced during industry downturns when borrowers have fewer alternative sources of finance. Results are consistent when I use alternative measures of cost stickiness and alternative research designs. Overall, my evidence indicates that creditors play a monitoring role in firms’ cost behaviors and identifies a specific channel (loan covenants) through which the misalignment of incentives can impact cost asymmetry. JEL Classifications: D24; G32; M41.

Asymmetry in Cost Behavior in Brazilian Hospitals

Objectives: Investigating if the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior of public and private hospitals in Brazil. Methods: In order to test the sticky cost phenomenon in a different sector of companies and industries, we used panel data regression to investigate the asymmetric cost behavior in Brazilian hospitals, analyzing the hospital cost behavior regarding the variation in revenues and verifying whether the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior. As a result, this research took the findings obtained by the models applied to data from the 101 hospitals comprising the sample, spread over the 2010–2019 period. The research was divided into four sections. The first section tested asymmetry for fixed assets over total assets for hospitals in general. The second section divided the sample into public and private hospitals. The third section analyzed the sample of conglomerates against a single hospital. Finally, the fourth section tested the asymmetry of the hospitals in the sample measured by the number of beds. Results: The evidence documented here partially confirms the results of literature on the existence of asymmetric cost behavior regarding variations in revenue. The H1 hypothesis that the proportion of fixed assets over total assets is positively associated with the asymmetric cost behavior was confirmed, especially for private and small hospitals regarding fixed assets.

Does Supplier Competition Affect Asymmetric Cost Behavior?*

Does Supplier Competition Affect Asymmetric Cost Behavior?*

Does innovation matter for asymmetric cost behaviour? Evidence from forward citations to the patents

AbstractThis study investigates how innovation affects cost stickiness. Utilising data on patents of US firms between 1991 and 2022, we find that the extent of cost stickiness is greater with a greater number of forward citations for patents. We also find that the main relationship is more pronounced in high‐tech industries, high labour cost intensity, and market competition. In addition, we find that firms with a higher number of patents and forward citation experience a subsequent increase in sales. Overall, this makes a valuable addition to the extant literature, proposing that patents serve as an alternative driver of cost stickiness.

Assessing the asymmetric cost behavior in China

PurposeA country’s institutional environment influences every facet of its business. This paper aims to identify institutional factors (state ownership, government attention on employment and employees’ educational background) that affect the asymmetric cost behavior in China.Design/methodology/approachUsing 2,570 listed firms’ data between 2002 and 2015, we use empirical models to explore the effects of state ownership, government attention on employment and employees’ educational background on the asymmetric cost behavior in China.FindingsThis study found that the asymmetric cost behavior of central state-owned enterprises (CSOEs) is greater than local state-owned enterprises (LSOEs). Meanwhile, the empirical results show that government attention on employment is reflected in five-year government plans, and employees’ educational backgrounds are positively associated with asymmetric cost behavior.Originality/valueThis study contributes to the economic theory of sticky costs, institutional theory and asymmetric cost behavior literature by providing evidence that shows how government intervention and employee educational background limit the flexibility of corporate cost adjustments. Additionally, this study provides guidance to policymakers by showing how government long-term plans affect firm-level resource adjustment decisions.

Asymmetric Cost Behavior in Norwegian Companies

Asymmetric Cost Behavior in Norwegian Companies

CEO narcissism and asymmetric cost behavior

This research investigates the relationship between chief executive officer (CEO) narcissism and asymmetric cost behavior. Based on the expectation that CEOs’ narcissism leads to myopic management, I replicate the existence of cost stickiness in a large sample of U.S. public firms and find that narcissistic CEOs exhibit a lower degree of cost stickiness. Additionally, I find that the negative effect of CEO narcissism on cost stickiness is boosted under poor past performance and when firm uncertainty is high. Several robustness tests, including alternative measurements of costs and narcissism, confirm the validity of the results. The findings of this study contribute to the current discussion about the role of narcissistic personalities of CEOs and the behavioral aspects of corporate decisions.

Asymmetric cost behavior: Theory, meta-analysis, and implications

Asymmetric cost behavior is an emerging and dynamic research area within the context of contemporary cost management research. This study systematically reviews asymmetric cost behavior research published in ABS-ranked journals (53 English-speaking journals) between 2003 and 2020. Additionally, we provide a review of the econometric models and instruments employed in empirical asymmetric cost behavior research and a meta-analysis of prior empirical evidence for the main determinants of the direction and intensity of the asymmetric cost behavior phenomenon. Several research streams are recognized within two major themes of cost asymmetry empirical research: (i) determinants of the asymmetric cost behavior phenomenon, and (ii) cost asymmetry as a determinant of earnings behavior, earnings prediction, and other microeconomic and macroeconomic phenomena. Each major component of our review is accompanied by critical analysis and suggestions for future research. Meta-analysis of the existing body of cost asymmetry studies reveals no publication bias but increasing heterogeneity within existing empirical evidence for cost asymmetry.

Does Asymmetric Cost Behavior Reduce Over Time? "Evidence from the Lagged Effect of Investment Intensity on Operating Cost and SG&A Cost"

Does Asymmetric Cost Behavior Reduce Over Time? "Evidence from the Lagged Effect of Investment Intensity on Operating Cost and SG&A Cost"

온실가스 규제가 비대칭적 원가행태에 미치는 영향

Purpose – This study analyzes the relationship between asymmetric cost behavior and greenhouse gas (GHG) regulation. This study examines cost behavior for cost of goods sold (CGS), selling, general and administrative cost (SG&AC), general and administrative cost (G&AC), and selling cost (SC). Design/Methodology/Approach – This study analyzes companies listed on the Korean Stock Exchange (KSE), and the analysis period is from 2011 to 2020. The sample taken for this study includes 5,120 firmyear observations. Findings – The main results are as follows. First, we find that when sales are decreased, the downward stickiness of CGS is accentuated in firm-related GHG regulation. This is interpreted as an increase in committed cost as much as idle resources due to an increase in facility investment to reduce GHG emissions. Second, this study demonstrates that the accentuation of the downward stickiness of CGS and G&AC by GHG regulation mainly occurs in owner manager firms. This study is the first in which GHG regulation affects asymmetric cost behavior. Research Implications – The results of this study will contribute to the development of corporate climate change strategies and government GHG regulation policy. This can provide a basis for market participants, such as financial analysts, in predicting the effect of GHG regulation on firm performance.

A Tool for Managerial Decision Making in Emerging Economies, and Asymmetric Cost Behavior: Evidence from Ecuador

Business sectors may be affected by changes in their activity levels. For this reason, the administration requires tools that allow to show the impact on its profitability. The asymmetry in the behavior of the costs of companies belonging to the economic sectors of beverage production and meat processing in Ecuador for the period between 2012 and 2018 was analyzed. 291 companies that presented activity were studied. For the study of sticky costs, 3 analysis variables were defined: operational income, total costs and expenses, and personnel costs and expenses; to which, four different study techniques were applied. The different analysis techniques show consistent and robust results, with the exception of the estimation using panel data in the meat sector. The study ́s results show an asymmetric behavior within the costs, which suggest an inability for Ecuadorian companies to lower their costs due to a drop on their income, whereas, when their income raises, so does their cost; a fact that matches the recent evidence found worldwide. This asymmetry could be explained by factors such as regulatory rigidity or expectations of a quick business recovery.

Exploring the asymmetric cost behaviour in the context of European non-listed firms

ABSTRACT This study provides international empirical evidence for the asymmetric cost behaviour of operating expenses in the context of the European non-listed firms. We employed a data sample of 4,177,625 firm years observations from Amadeus Database for the period 2009–2017 to explore the asymmetric cost behaviour phenomenon at the EU-28 countries pool and country level. Substantial variation in the direction of the asymmetric cost behaviour, across countries and firm size clusters, has been observed. However, in a considerable number of cases operating expenses exhibit symmetric cost behaviour. We conjecture that the reasons behind the observed pattern of asymmetric cost behaviour in the organizational setting of non-listed firms are the relative low availability of entrepreneurial economic resources and the presence of entrepreneur which might affect the resource allocation decision-making process.