How Timely are Earnings When Costs are Sticky? Implications for the Link between Conditional Conservatism and Cost Stickiness*

Homburg, Carsten; Nasev, Julia

doi:10.2139/ssrn.1270735

Cited by 9 publications

(8 citation statements)

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“…Secondly, Malik (2012) believed that managers' optimistic expectations also lead to operational stickiness. Optimistic managers are more likely to keep excessive operational factors to cope with increased demand because they tend to regard the demand decline as a temporary situation (Homburg and Nasev, 2008;Kama and Weiss, 2013). Additionally, agency theory shows that managers tend to make decisions beneficial to their own interests.…”

Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

The impact of operational stickiness on product quality: product diversification moderation

Lin

Zhang

Shi

2020

JMTM

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PurposeThe purpose of this paper is to examine the impact of operational stickiness on product quality. Particularly, it analyzes the moderating effect of product diversification on the relationship between operational stickiness and product quality of exporting firms from China.Design/methodology/approachUsing a sample of 3,567 exporting firms between 2002 and 2012 in China, this paper develops a fixed effect model to demonstrate the nonlinear relationship between operational stickiness and product quality.FindingsResults show that operational stickiness has an inverted U-shaped impact on product quality, while inventory stickiness, property, plant and equipment (PPE) stickiness and labor stickiness are used to measure operational stickiness. Furthermore, the impact of operational stickiness on product quality is found to be moderated by product diversification.Practical implicationsManagers can achieve an optimal level of product quality by adjusting the level of operational stickiness. Firms with excessive operational stickiness should appropriately reduce the degree of stickiness to improve product quality. Besides, managers who focus on product quality should be cautious in adopting the product diversification strategy and be wary of the loss of product quality this strategy may cause.Originality/valueThis paper is the first study that has empirically validated the inverted U-shaped relationship between operational stickiness and product quality, and confirmed the moderating effect of product diversification on the relationship between operational stickiness and product quality. It provides a new idea to improve product quality by operational management.

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Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

The impact of operational stickiness on product quality: product diversification moderation

Lin

Zhang

Shi

2020

JMTM

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“…Second, managers' optimistic expectations about future growth may lead them to avoid reducing operational factors during the period of demand decreasing (Malik, 2012). If managers are optimistic that current demand declines are temporary, demand will rise in the short term, they are more likely choose to keep or maintain excessive operational factors to cope with increased demand and implement sticky operational management (Homburg and Nasev, 2008;Kama and Weiss, 2013). Additionally, the lack of management experience is also an important cause of sticky management.…”

Section: Operational Stickinessmentioning

confidence: 99%

The role of operational stickiness in impacting new venture survival

Shi

Zhu

Zhang

et al. 2019

JMTM

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Purpose The purpose of this paper is to examine the existence of operational stickiness, and explores the relationship between operational stickiness and the likelihood of survival. Furthermore, the authors investigate this relationship in different manufacturing industries. Design/methodology/approach Using a large sample of more than 200,000 new manufacturing small and medium enterprises between 2000 and 2013 in China, the authors use the survival analysis method to investigate the non-linear relationship between operational stickiness and the likelihood of survival. Findings The authors demonstrate the existence of operational stickiness, such as inventory stickiness, property, plant, and equipment (PPE) stickiness, and labor stickiness. Next, the authors find the inverted U-shaped relationship between operational stickiness and the likelihood of survival. Furthermore, the authors document the differential effect of operational stickiness on the likelihood of survival in different industries. Practical implications Managers can improve the firm’s likelihood of survival by maintaining a moderate inventory stickiness and PPE stickiness. However, managers should not adopt sticky labor management in manufacturing industries. Originality/value This paper may be the first study to demonstrate the existence of operational stickiness, and confirm the inverted U-shaped relationship between operational stickiness and the likelihood of survival.

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“…Consequently, regardless of whether the company belongs to the efficient or inefficient cost stickiness subgroup, it has a negative impact on the current profit (decline in sales year-by-year), because the decline in sales is not compensated by the same amount of reduction in costs. But the cost stickiness of efficient companies will have a positive impact on future profits (due to a rebound in sales as positive news), and inefficient firms have a negative impact on future profits (due to the permanent decline in sales as negative news) (Homburg and Nasev, 2010).…”

Section: The Concept Of Cost Stickinessmentioning

confidence: 99%

The relationship between cost stickiness and financial reporting quality in Tehran Stock Exchange

Salehi

Ziba

Gah

2018

IJPPM

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Purpose The purpose of this paper is to investigate the relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange. Design/methodology/approach 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. Findings 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. Originality/value 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.

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How Timely are Earnings When Costs are Sticky? Implications for the Link between Conditional Conservatism and Cost Stickiness*

Cited by 9 publications

References 0 publications

The impact of operational stickiness on product quality: product diversification moderation

The impact of operational stickiness on product quality: product diversification moderation

The role of operational stickiness in impacting new venture survival

The relationship between cost stickiness and financial reporting quality in Tehran Stock Exchange

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