Earning Management and Cost stickiness

Koo, Jeong-Ho; Song, Seungah; Paik, Tae-Young

doi:10.14257/astl.2015.84.09

Cited by 11 publications

(7 citation statements)

References 5 publications

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“…Therefore, these results do not support agency theory which states that to avoid loss, management will perform upward earnings management. This result also does not support previous research (Xue & Hong, 2016;Hemati & Javid, 2017;and Koo et al, 2015;Liu & Lu, 2007) which found that earnings management has a negative effect on expense stickiness, which indicates that the level of expense stickiness will decrease if the company practices. upward earnings management.…”

Section: Resultscontrasting

confidence: 95%

Effect of corporate governance and earnings management on expense stickiness

Allolinggi

Saraswati

Ghofar

2021

irjmis

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This study aims to examine and analyze the effect of corporate governance and earnings management on expense stickiness. By defining small positive earnings or small earnings increases as the proxy of earnings management and divides the sample into earnings management (upward earnings management) and non-earnings management. This study uses a broad measure of corporate governance by extracting the main factors of corporate governance. The sample obtained is 251 company samples for earnings management samples and 133 companies for corporate governance samples and processed using the Multiple Linear Regression method using the regression model from the research of Xue and Hong (2016). The results showed that corporate governance can reduce the level of expense stickiness. However, the results of this study cannot prove that earnings management can reduce the level of expense stickiness, but this research proves that companies that do not indicate earning management influence the existence of expense stickiness.

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Section: Resultscontrasting

confidence: 95%

Effect of corporate governance and earnings management on expense stickiness

Allolinggi

Saraswati

Ghofar

2021

irjmis

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“…Authors find that when managers face incentives to avoid losses or earnings decreases, or to meet financial analysts' forecasts, they accelerate downward adjustment of slack resources for sales decrease, which mitigates the magnitude of cost stickiness. The third study, Koo et al (2015), investigates the relationship between earnings management and cost stickiness in a sample of US firms during the years 1997-2007. They find that when activity declines, managers cut down costs aggressively to manage earnings, which mitigates cost stickiness, while firms with fewer earnings management incentives were found to show greater cost stickiness.…”

Section: Literature Reviewmentioning

confidence: 99%

Board characteristics and asymmetric cost behavior: evidence from Egypt

Ibrahim

2018

ARJ

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Purpose 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. Design/methodology/approach 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. Findings 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. Originality/value 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.

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“…In literature, studies over cost stickiness are divided into three main groups. The first group covers studies (Anderson et al, 2003;Subramaniam and Weidenmier, 2003;Porporato and Werbin;2012;Abu-Serdaneh, 2014;Banker and Byzalov, 2014;Dalla Via and Perego, 2014;Ibrahim, 2015) over evidence of asymmetric cost behavior, determination of the time dimension and analysis of firm characteristics that affect cost stickiness with the second group covering studies (Dierynck et al, 2012;Kama and Weiss, 2013;Koo et al, 2015) over correlations among managerial incentives, earnings management and asymmetrical costs and the third group covering studies (Calleja et al, 2006;Chen et al 2012;Pichetkun, 2012;Banker et al, 2013;Xue and Hong, 2016) over correlations between corporate governance and asymmetrical cost behavior (Ibrahim, 2018: 304-306). Apart from the three aforementioned groups, the literature review offers studies that investigate the correlation with the performance of mergers and acquisitions while testing cost stickiness (Alexandridis et al 2012;Betzer et al, 2015;Jang et al, 2017;Uğurlu et al, 2019).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Sticky Cost Behavior: Evidence from BRICS+T Countries

ATASEL¹,

ŞEKER²,

Yıldırım³

2021

Ege Akademik Bakis (Ege Academic Review)

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The aim of this study is to determine the sticky cost behavior of publicly-traded companies in Brazil, Russia, India, China, South Africa and Turkey (BRICS+T) that are classified as developing economies during the period 2010-2019. In addition to the purpose, the firm characteristics that play a role in the sticky cost behavior of firms and the effect of the Gross Domestic Product (GDP), which is a macroeconomic indicator, has been investigated. The study revealed that the firms in BRICS+T exhibit a sticky cost behavior. Furthermore, it also suggested that inventory intensity, which is one of the firm characteristics, does not affect cost stickiness and that asset, employee and property, plant and equipment intensity raise the level of cost stickiness while debt intensity declines the level of cost stickiness. Last but not least, it was found out that GDP, which is a macroeconomic indicator, raises the sticky cost level when it tends to rise.

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Earning Management and Cost stickiness

Cited by 11 publications

References 5 publications

Effect of corporate governance and earnings management on expense stickiness

Effect of corporate governance and earnings management on expense stickiness

Board characteristics and asymmetric cost behavior: evidence from Egypt

Sticky Cost Behavior: Evidence from BRICS+T Countries

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