Stickiness in Costs and Voluntary Disclosures: Evidence from Management Earnings Forecasts

Abstract

We investigate the relationship between cost stickiness and management earnings forecasts. Prior research suggests that earnings are more volatile for sticky cost firms resulting in greater earnings forecast errors. The greater forecast errors might increase investors' demand for information and induce managers to issue earnings forecasts. Alternatively, managers might refrain from issuing earnings forecasts for sticky cost firms because greater forecast errors might damage managers' credibility and adversely affect their job security. We find that cost stickiness is positively associated with management earnings forecast issuance, suggesting that the benefits outweigh the costs. Prior research also suggests that cost stickiness has negative implications for earnings. We find a positive association between cost stickiness and management earnings forecast errors, suggesting that managers do not fully incorporate the negative implications of cost stickiness into their forecasts. Finally, we find that analysts' forecast errors for sticky cost firms are greater than managers'. JEL Classifications: M41; M46; G12.

Is Cost Stickiness a Bad Signal From Catur Marga Perspective?

“…A total of two articles were conceptual papers Guenther et al, 2014), and 24 articles did not discuss the determinants of cost stickiness but instead used them as independent variables. These articles have not been used because they discuss the effects of cost stickiness on, for example, the forecasting of earnings (Ciftci et al, 2016;Ciftci & Salama, 2018;Kaspereit & Lopatta, 2019;Lopatta et al, 2020;Lu et al, 2020;Tang et al, 2020;Weiss, 2010). Be cause our focus is the managers' behaviour, we have dropped 15 articles that discuss, for example, the effect of an auditor's choice, ac counting policies, changes in office address, CEO structure, and changes in the research sample on cost stickiness (Chae & Chung, 2015;Chae & Ryu, 2016;Chung et al, 2019;Ibrahim, 2018;Lee et al, 2019;Loy & Hartli eb, 2018;Shust & Weiss, 2014;Xue & Hong, 2016;Yang, 2015).…”

“…As users of cost account ing information, we need to understand the causes of the asymmetry of cost behaviour, especially cost stickiness. Studies have even shown that cost stickiness (CS) affects the company's stock performance (Ciftci et al, 2016;Ciftci & Salama, 2018;Kaspereit & Lopatta, 2019;Lopatta et al, 2020;Lu et al, 2020;Tang et al, 2020;Weiss, 2010). The asymmetry of cost behaviour is due to individual management considerations in ma king decisions.…”

Mali̇yet Yapişkanliğinin Pay Geti̇ri̇si̇ne Etki̇si̇: Turi̇zm Alt Sektörleri̇nde Bi̇r Uygulama

“…da önemlidir. Uygulamalı ve teorik araştırmalar, maliyet davranışının faaliyet etkinliğini (Ryu, Lee ve Won, 2014), işletme performansını (Anderson ve Yu, 2015), ihtiyatlı politikaları benimseyen muhasebe muhafazakârlığına bağlı olarak pay senedi değerini (Mahdavinia ve Zolfaghari, 2017) ve hisse başı kazançları (Ciftci ve Salama, 2018) etkilediğini ortaya koymaktadır. İşletmelerin faaliyet giderlerinde maliyet asimetrisinin artması işletme faaliyet etkinliğini azaltıcı rol oynamaktadır (Ryu vd., 2014: 28).…”

Is cost stickiness associated with management earnings forecasts?

“…Limited existing research studies the association between cost management behavior and MEF. Ciftci and Salama (2018) focus on how financial analysts' forecast errors as proxy for information asymmetry influence the management's propensity to issue earnings forecasts. Our paper studies in depth, firm efficiency, adjusting costs and management expectation, which represent firm characteristics.…”