Cost Behavior: A Comprehensive Analysis on the Cost Stickiness Theory in the ASEAN

• Author(s): Julian Antonio
• Paper ID: 1703924
• Page: 104-116
• Published Date: 13-12-2022
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 6 Issue 6 December-2022

Abstract

There is an underlying assumption provided by common accounting literature is that SG&A costs move symmetrically with regards to changes in activity, however that may not always be the case. Empirical studies suggest that costs do not move proportionately with changes in sales, wherein the increase of costs is not proportion to the decrease in costs for every absolute change in sales revenue. This asymmetric cost behavior is known as cost stickiness. A comprehensive study was performed which investigated the presence of cost stickiness and the various factors that affect it within publicly listed firms in the ASEAN-6. We find that ASEAN firms exhibit sticky cost behavior wherein SG&A costs on average increase by 0.2718% and decrease by only 0.1929% for every 1% absolute change in revenue. Second, we find that costs are stickiest when revenue changes by 15% to 20%. Third, we find that employee intensity has a significant effect on the stickiness level of firms in the service industry. Lastly, the researcherfinds that firms from the different countries in the ASEAN exhibit varying magnitudes of stickiness.

Citations

IRE Journals:
Julian Antonio "Cost Behavior: A Comprehensive Analysis on the Cost Stickiness Theory in the ASEAN" Iconic Research And Engineering Journals Volume 6 Issue 6 2022 Page 104-116

IEEE:
Julian Antonio "Cost Behavior: A Comprehensive Analysis on the Cost Stickiness Theory in the ASEAN" Iconic Research And Engineering Journals, 6(6)