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To create and sustain a resource-based competitive advantage, managers acquire and develop specialized resources as they grow their firms. The authors argue that an important part of committing to a resource-based strategy is a willingness to keep spending on specialized resources during periods when sales and profits are down. The authors seek to validate this conjecture by examining whether such resource-based commitment to a customer-centered strategy results in improved customer satisfaction. The authors use the stickiness of selling, general, and administrative (SG&A) expenses to capture this commitment empirically. The authors first document that future customer satisfaction is positively associated with SG&A cost stickiness, consistent with the premise that the retention of specialized SG&A resources during low demand periods helps firms to build and maintain relationships with customers over time. Next, the authors test whether expected future benefits of customer satisfaction are enhanced when SG&A cost stickiness is higher. The authors find that the positive relation between Tobin’s Q and customer satisfaction is positively moderated by SG&A cost stickiness. Finally, the authors test whether earnings persistence, a quality of earnings associated with sustained performance over time, is positively associated with the interaction between customer satisfaction and SG&A cost stickiness. The authors find that it is. Their evidence supporting these predictions is consistent with the conjecture that resource-based commitment reflected in cost stickiness is an important dimension of creating and sustaining a resource-based competitive advantage.

Purpose – The purpose of this study is to investigate whether a firm’s cost structure (specifically, its cost stickiness) is associated with environmental, social, and governance (ESG) sustainability factors of performance and disclosure.

Methodology/approach – This study uses MCSI Research KLD Stats (KLD) and Bloomberg databases for the 13-year period from 2003 to 2015 in constructing ESG performance and disclosure variables, respectively. The authors adopt the general cost stickiness models from Anderson, Banker, and Janakiraman (2003) and Banker, Basu, Byzalov, and Chen (2016) to perform the analysis.

Findings – The authors find that a firm’s level of cost stickiness is positively associated with certain sticky corporate social responsibility (CSR)/ESG activities (both overall and when separately classified as strengths or concerns) but not with other nonsticky CSR activities. The authors also show that the association between cost stickiness and ESG disclosure is incrementally stronger for firms with CSR activities classified as sticky. Furthermore, the authors provide evidence that ESG disclosure is greater when both cost stickiness and the degree of sticky CSR activities increase. The authors show that when cost stickiness is high and CSR activities are sticky, management has incentives to increase CSR/ESG sustainability disclosure to decrease information asymmetry.

Originality/value – The findings present new evidence to understand how management integrates cost management strategies with various dimensions of sustainability performance decisions and show that not all ESG activities are equally effective when it comes to cost stickiness. The authors also demonstrate that increased sustainability disclosure helps reduce information asymmetry incrementally more when both costs are sticky and CSR activities are sticky.

Considering the greenwashing risk of symbolic environmental management, this study aims to distinguish the motivation for environmental investment growth (EIG) from the corporate cost stickiness and anti-stickiness perspectives.

This study analyzes the impact of substantive and symbolic environmental management on cost stickiness. Subsequently, competing hypotheses are proposed. Finally, empirical tests are conducted on Chinese A-share listed companies from 2010 to 2019.

EIG significantly improves enterprises’ cost stickiness. The cost of high EIG enterprises does not decrease significantly with a decline in income compared to other enterprises, which is consistent with the motivation for substantive environmental management. Enterprises with high asset specificity and optimistic management expectations show more obvious substantive environmental management. Government and public environmental concerns cause more pronounced substantive environmental management.

An evaluation of corporate environmental responsibility should take into account both what the company has disclosed and what it has actually done.

Governments and the public should have a comprehensive understanding of corporate environmental management. They need to strengthen their ability to recognize symbolic environmental management and support substantive environmental management.

Fundamental to the evaluation of corporate environmental responsibility, this study distinguishes the motivations for corporate EIG disclosures from the cost stickiness perspective to avoid the risk of greenwashing. Hypotheses on the impact of substantive and symbolic environmental management on cost stickiness are presented. This study verifies the substantive environmental management characteristics of listed Chinese companies.

The purpose of this paper is to investigate the relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange.

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.

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.

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.

The purpose of this paper is to identify the relationship between organizational capital and the subsets of organizational capital (intellectual capital (IC)) cost and cost stickiness.

This study is causal correlational research. The data related to the company’s financial statements were collected using the Rahavard Novin Software and www.rdis.ir. In this study, panel data were run with the use of Eviews 8, in order to test the hypotheses. The ordinary least-squares method is used in this study to estimate the parameters of the model.

The results obtained from the study show that there is a significant relationship between organizational capital and cost stickiness. However, there is no significant difference between high and low rank in terms of organizational capital and cost stickiness. In addition, there is a significant difference between IC and cost stickiness. Moreover, there is no significant difference between the components of IC and cost stickiness. Also, IC has an effect on the intensity of the relationship between organizational capital and cost stickiness.

This study explores the relationship between organizational capital and the subsets of IC and cost stickiness. Independent variables used in this study include organizational capital, IC and its components in the Pulic model, i.e. the efficiency of capital employed, the efficiency of human capital and the efficiency of structural capital.

This paper aims to provide further evidence on asymmetric cost behavior (cost stickiness) from one of the emerging economies, Egypt. The study provides empirical evidence on the potential impact of corporate governance on nature and extent of asymmetric cost behavior.

The study estimates three multiple regression models using ordinary least squares to examine the behavior of cost of goods sold (COGS) and the influence of board characteristics and other control variables in a sample of 80 listed companies during 2008-2013.

The analysis provides evidence on COGS asymmetric behavior, where the analysis finds that COGS increases by 1.05 per cent but decrease by 0.85 per cent for an equivalent activity change of 1 per cent, which contradicts the traditional cost model assumption that costs behave linearly. In addition, the analysis finds that firm-year observations with larger boards, role duality and higher non-executives ratio exhibit greater cost asymmetry than others, while firms-years with successive sales decrease, higher economic growth and institutional ownership found to exhibit lower cost stickiness.

This study contributes by providing evidence on asymmetric cost behavior from one of emerging economies. Further, the study extends the very few studies on the relationship between corporate governance and asymmetric cost behavior. In addition, the study contributes by examining a different cost type (COGS) that has been examined by very few studies. Finally, the study provides an evaluation of the 2007 Egyptian Corporate Governance Code in the cost behavior context.

This paper aims to examine whether costs respond asymmetrically to demand change, and examine the influence of economic growth on cost stickiness, in the pre- and post-2008 financial crisis periods.

This study uses multiple regression models to investigate the behavior of three costs: selling, general and administrative (SG & A), cost of goods sold (COGS) and operating costs (OCs) for the 2004-2011 period. Moreover, the study compares cost stickiness during the economic prosperity period (2006-2008) with cost stickiness during the economic recession period (2009-2011).

The results reveal that SG & A increased by 0.38 per cent but decreased by 0.08 per cent, and COGS increased by 1.02 per cent but decreased by 0.57 per cent for a 1 per cent demand change, which proves cost stickiness. However, OC increased by 0.91 per cent, but decreased by 1.03 per cent for a 1 per cent demand change, which proves cost anti-stickiness. Moreover, SG & As were sticky during the prosperity period, but anti-sticky during the recession period. COGSs were sticky in both periods; however, the extent of cost stickiness is larger in the prosperity period. In contrast, OC were statistically insignificant in both periods.

The results imply that managers should not use the same cost model all the time, as the economic growth fluctuations were found to affect the nature and extent of cost behavior. In addition, researchers should provide a modified cost model that considers the nonlinearity of correlation between costs and activity.

The literature suggests that management discretion to adjust resources in response to changes in sales can create asymmetric cost behavior and management incentives to move stock prices can influence its decision to release management earnings forecasts (MEF). The purpose of this paper is to investigate the association between a firm’s degree of cost stickiness and its propensity to release MEF. The authors propose that both MEF and cost stickiness are influenced by management strategic choices and provide two possible explanations along with supportive evidence. First, when management is optimistic about future performance, it tends to increase both cost stickiness and is willing to disclose the optimistic expectations through MEF. Second, cost stickiness increases information asymmetry between management and investors, thus management tends to issue earnings forecast to mitigate the perceived information asymmetry.

The authors collect firm-level fundamental data from the COMPUSTAT database, and market data from the CRSP database during 2005 and 2016. The data used to measure variables related to institutional ownership and financial analysts are, respectively, obtained from the Thomson Reuters and the I/B/E/S databases. The quarterly MEF data are from two databases. The authors obtain the data before 2012 the from Thomson First Call’s Company Issued Guidance database and manually collect the data between 2012 and 2016 from the Bloomberg database for the largest 3,000 publicly traded US companies. The measurement of cost stickiness is based on the industry-level measurement developed by Anderson et al. (2003) and the firm-level measurements developed by Weiss (2010). The authors construct two measurements, management’s propensity to issue MEF and the frequency of MEF, to capture management’s voluntary disclosure strategy.

The analyses of a sample between year 2005 and 2016, indicate that the firm-level cost stickiness is positively associated with the firm’s propensity to issue MEF and the frequency of MEF. Moreover, the authors find that the level of cost stickiness is associated with more favorable earnings news forecasted by management. Additional tests suggest that both information asymmetry and managerial optimism may explain the relationship between cost stickiness and MEF. Finally, the authors find that the association between cost stickiness and MEF behaviors is more pronounced when the resource adjustment cost is high and when the firm efficiency is high. The results are robust after using alternative measurements of cost stickiness and MEF.

First, this paper attempts to build a bridge between managerial accounting and financial accounting by providing evidence of managerial incentives and discretions that affect both cost structure and earnings. The authors contribute to, and complement, prior studies that primarily disentangle the complicated accounting information system by focusing on either the internal information system or the external information system. Second, the paper complements prior studies that examine cost stickiness and its determinants of asymmetric cost behavior by providing additional evidence for the value-relevance of cost stickiness strategy and its link to MEF releases in mitigating information asymmetry. Third, the findings are also relevant to current debates among policymakers, academia and practitioners regarding modernization of mandatory and voluntary disclosures through discussing the managerial incentive behind the managerial disclosure strategies as reflected in MEF releases (SEC, 2013). Fourth, the authors provide evidence regarding management’s role in influencing cost asymmetry and MEF releases, which support the theoretical argument that management discretions affect the firms’ cost structure and MEF disclosures.

Purpose – This article examines the operating lease cost stickiness characteristics exhibited by retail firms.

Methodology/approach – Anderson, Banker, and Janakiraman (2003) laid important groundwork for the study of asymmetric cost behavior or cost stickiness. The authors found that a firm’s selling, general, and administrative costs (SG&A) costs increase more with a sales increase than those expenses decrease with an equivalent sales decline. Their findings provided avenues for many studies with differing focal variables; however, extant research has not explored the degree of cost stickiness associated with operating lease expenses. Recognizing the nature and magnitude of operating leases and the competitive and changing environment for retailers, this study adapts Anderson et al.’s (2003) model to provide insights into operating lease stickiness. The study uses archival financial data from 1997 through 2016 for specialty retail firms in testing the lease cost stickiness hypotheses.

Findings – The results of this study supported the hypotheses that operating lease expenses exhibit stickiness behavior and are relatively stickier than future lease commitments for retail firms.

Originality/value – By focusing on retail firms and related lease expenses, this study provides insights into the increasingly competitive retailer environment. This article’s findings will enhance understanding of how specialty retail firms’ managers react to reduced revenues. Finally, given recent authoritative pronouncements affecting accounting for leases and the significance of leasing transactions, research providing insights into cost behavior and managerial actions stands to make an important contribution to literature and practice.

This paper aims to examine the effect of dividend regulation on cost stickiness (i.e. the asymmetric change in firm expense between sales increase and sales decrease) and explore the underlying mechanism.

Based on the quasi-natural experiment of the Guideline for Dividend Policy of Listed Companies issued by the Shanghai Stock Exchange (SSE) in 2013, the authors employ a difference-in-difference model to investigate the impact of dividend regulation on cost stickiness.

The authors find that the cost stickiness of treatment group firms has decreased significantly when compared with control group firms after the dividend regulation. Moreover, this effect is more pronounced among firms in lower marketization regions, in lower competition industries and those with less analyst coverage and lower cash flow levels. Further analyses show that dividend regulation reduces the cost stickiness of firms by mitigating agency problems. Finally, the conclusion holds after several robust tests, including controlling for firm fixed effect, propensity score matching (PSM), placebo test and reconstruction of expense variable.

This paper confirms that dividend regulation serves an important role in corporate governance, which reduces firms' agency costs and thereby decreases cost stickiness. The conclusions shed light on the dividend policies of listed companies and capital market regulation in the future.